Sunday, August 25, 2013

July’s new and existing home sales and state employment and unemployment data

  there were few important monthly releases this past week, as is typical for the 2nd last week of each month; however, we did see the release of both of the widely watched reports on home sales; that on Existing-Home Sales from the National Association of Realtors and on New Single Family Home Sales from the Census Bureau..

  the NAR reported that existing home sales "spiked" in July, increasing at a seasonally adjusted 6.5% rate to an annual sales rate of 5.39 million homes, up from a 5.06 million pace in June, which was originally reported at 5.08 million...July's sales were 17.2% higher than the 4.60 million-unit rate of a year earlier and at the highest seasonally adjusted pace since November 2009, when the first time homebuyer tax credits boosted existing home sales...unadjusted data showed preliminary July sales at 519,000 homes, up from the revised 500,000 sold in June, and up 20.7% from the 430,000 homes sold in July of 2012...since homes closed in July were likely contracted for in May, just as interest rates were beginning to rise, the prospect of even higher rates going forward likely provided an incentive for many to close sooner rather than later...

July existing homes by price range

  the national median selling price for all homes sold in July was $213,500, down 0.2% from the $214,000 median price realized in June, but up 13.7% from the median price of $187,800 in July of 2012, and just 7.3% below the NAR peak median of $230,400 in 2006....this was the 8th consecutive month of double digit year over year median home price increases and the 17th consecutive month of increasing median prices overall, a run only matched by the January 2005 to May 2006 period...the average home price realized in July was $260,100, up a bit from $260,000 in June and 10.2% above the average home price of $236,100 in July of last year...prices west of the Rockies continued to rise; the median sales price in the West was $287,500, up 19.2% from a year earlier, while the average sales price was $329,700, 14.2% higher than last July...nationally, the median price for a single family home in July was $214,000, down 0.3% from $214,000 in June, but up 13.5% from a year earlier, while the average price for a single family home was at $260,600, down from $261,500 in June but 10.0% higher than the $237,000 average of last July...2.28 million previously owned homes remained on the market at the end of July, up from 2.19 million in June, which the NAR calculates to be a 5.1 month supply at the current sales pace; that's still 5% below year ago figures, and the NAR blames these tight inventories of available homes for above-normal price growth in some areas..

the pie graph to the above right, from the NAR, shows the percentage of those homes sold in July in each of several price ranges; only 15% of homes sold for less than $100,000, represented by the turquoise wedge in the upper right of the pie, while another 44%, represented by the large purple wedge, sold for between $100,000 and $250,000, and 29% more sold for between $250,000 and $500,000...thus, 12% of homes sold for over a half million, with 2% of the total selling for over a million each...below, we have an NAR bar graph that shows the year over year percentage change in the number of homes sold in each of those price brackets; since those homes selling for under $100,000 is the only range to see a decline, and all three price ranges over a half million saw increases of over 44%, it's clear most of what is driving the year over year price increases is a change in the mix of homes sold...  

July existing homes vs year ago price

a factor contributing to the changing mix was that distressed home sales, which sell at a discount, only accounted for 15% of July sales, down from 24% of sales a year earlier...foreclosures accounted for 9% of sales and sold for 16% less than similar unencumbered homes. while short sales accounted for 6% of sales and sold at a 12% discount...another element in the mix is that new purchases by investors slumped to 16% of total sales in July, down from 17% in June and down from a peak of 22% of all sales earlier this year...first time home buyers arent participating as they normally would; they still just accounted for 29% of sales in July, down from 34% a year ago, while the NAR reports all-cash transactions continue to account for 31% of sales, same as June, and up from 24% a year ago...the percentage may even be higher than the realtors report; an analysis last week by economists at Goldman put the all cash figure at over 50%, with only 44 cents of every home purchase dollar currently being financed, compared to 67% before the crisis.

not too surprisingly, there's quite a bit of regional and metro variability in these metrics; housing economist Tom Lawler has a monthly table showing cash sales, short sales, & foreclosures for selected cities which he's been adding more cities to monthly; he shows 70.0% of Florida townhomes & condos that sold in July exchanging hands for cash, with a high of 75.5% cash sales in the Miami area, compared to 15.9% in Omaha and 16.1% in the mid-Atlantic region; Las Vegas shows the highest distressed sales percentage in July at 36.0%; a year earlier, more than half the home sales in Las Vegas, Reno, Sacramento and Orlando were either foreclosures or short sales...

Graph: New Homes Sold in the United States

in contrast to the "spike" in July sales of existing homes, the Census report on July New Single Family Home Sales (pdf) indicated a sharp decline in contracts to purchase new homes; Census estimated that sales of new single-family homes in July were at a seasonally adjusted annual rate of 394,000, "13.4 percent (±14.5%)* below the revised June rate of 455,000"; which you'll recall means that it's 90% likely that the July sales change was somewhere between 1.1% greater and 27.9% less than June's...the given annual rate of 394,000, well below the median Bloomberg forecast of 487,000, was extrapolated from the Census estimate of 35,000 homes sold in July; June's new home sales, estimated last month at 48,000, or an annual rate of 497,000, have been revised downward to 43,000, while May sales, first estimated at 45,000, then at 43,000, are now revised down to 41,000, and April's estimated sales, first reported at 46,000 and revised to 44,000 last month, are now given at 43,000; the adjacent ALFRED bar graph shows these the net of this month's revisions; the blue bars represent unadjusted new homes sales estimates as reported last month for April, May and June, while the red bars show the revisions applied this month, and July's new sales..revisions of this magnitude - more than 10% in June - should not be a surprise to us, as we've previously noted many times, this report typically has the largest margin of error and is subject to the largest revisions of any census construction series...

Distressing Gap

even with the inexact nature of the July data, it seems clear that, combined with the large revisions of previous months, that new home sales have hit an interest rate induced air pocket...unlike existing home sales, which are logged as completed at closing, the Census uses contract signings for its count of new home sales, so the impact of rising interest rates on potential home buyers shows up in this monthly data before it does in the NAR reports...average interest rates for a 30 year fixed rate mortgage were at 3.45% in April, 3.54% in May, 4.07% in June, and 4.37% in July...so while some of June sales may have reflected mortgage rates locked in a month or so earlier, by July higher rates were already well established, or apparently at least enough so to give some potential buyers pause before signing...if that's the case, the weakness in new home sales should carry into August, as Freddie Mac reported 30 year rates at 4.58% this week, up from 4.40% last week and the highest 30 year mortgage rates in over 2 years...

the sudden July divergence between the two home sales metrics is obvious in the above graph from Bill McBride, which shows existing home sales monthly up in July tracked in blue, and new home sales, also annualized, tracked in red and clearly down, with the sales count for those on the right margin...both existing and new home sales had been generally, if erratically, increasing, until July, when closings of older homes spiked up in an apparent attempt to lock in lower rates, while new contract signings on new homes seemed to dry up in the face of higher rates...the McBride chart also shows what Bill calls the "distressing gap" between an allegedly normal relationship between new home sales numbers and sales of existing homes...looking at the graph, it seems a case could be made that there is now a new normal ratio between the two..

with this report, even the direction of the change in year over year new home sales has become uncertain....census reports that July new home sales were "6.8 percent (±18.6%)* above the July 2012 estimate of 369,000."; the asterisk in that headline directs us to an explanatory footnote which says in part "it is uncertain whether there was an increase or decrease" in new homes sold this year compared to last...what that statement means is the best they can guess with the scant data that they have is that there's a 90% likelihood that new home sales in July were somewhere between 11.8% less and 25.4% more than a year ago; in other words, if July's seasonally adjusted sales rate was extrapolated over a year, it's fairly likely we'd see somewhere between 325,458 and 462,726 new homes sold….with this degree of uncertainty, the results of these reports are not something we'd want to hang our policy decisions on...

FRED Graph

Census estimates that there were 172,000 new homes for sale at the end of July, which they've seasonally adjusted to 171,000 to arrive at a 5.2 month inventory of homes to be sold at the current seasonally adjusted sales rate...obviously, at least a ±14.5% margin of error would have to be applied to that metric as well...of those new homes remaining unsold, an estimated 36,000 were completed, 102,000 were under construction, and 34,000 had not yet seen groundbreaking...the median sales price of new houses sold during July was $257,200, which was down from $258,500 in June, which was revised up from the $249,700 median figure which was reported last month...the average new homes sales price in July was $322,700, up from the $302,200 average sales price in June; also revised up from the average sales price of $295,000 reported last month...a factor in the higher average in July vis a vis the lower median was that 5% of new homes sold in July reportedly sold for over $750,000, while only 3% of sales were in that upper price bracket in June...that the average new home price went up in July while the median price went down can even be seen on our adjacent FRED graph, which shows the average new home prices monthly since January 2004 in red, and the monthly median new home selling price in green over the same period, with the price ranges marked on the right margin...also shown on the same graph in blue is the track of new home sales monthly at a seasonally adjusted annual rate, with the scale for those on the left...

another report released this week we could take a look at was the Regional and State Employment and Unemployment Summary for July from the BLS, which takes the data from the two national employment surveys released at the beginning of the month and breaks it down by state...the same caveats apply to this report as to the national employment summary, ie, the establishment survey has a ±90,000 margin of error on non farm payrolls and is typically revised by an average of 46,000, and the unemployment rates coming out of the household survey have a margin of error of plus or minus 0.2 percentage points, which is why they usually lead these reports with a nebulous statement like "regional state unemployment rates were little changed in July"

  the states showing the largest gains in non farm payrolls in July were California, which added a net 38,100 additional jobs, Georgia, which saw 30,900 added to their payrolls, and Florida, which added 27,600 jobs; 15,000 of the California jobs were in professional and business services, which could be anything from a management consultant to taking out the trash, and 12,100 were in "trade, transport, and utilities" of which jobs in retail were the largest gainer nationally; Georgia's gains were widespread across all sectors, with 7,200 new jobs in government being an outlier compared to other states...meanwhile, Florida, which lost 6,900 government slots, saw 13,100 added in "trade, transport, and utilities"...other states that saw statistically significant one month job gains included Arizona with 13,700, Michigan with 21,400, Connecticut with 11,500, Delaware with 2,800, Kentucky with 9,500, North Dakota with 2,700, Utah with 10,600, Washington with 8,800, and West Virginia with 6,300...four states, meanwhile, saw statistically significant job losses; those with July job decreases included New Jersey, which shed 11,800 payroll jobs including 5,800 in government, Nevada, where 10,200 job losses were spread across several sectors, Maryland where 9,200 less jobs included 4,300 fewer in government, and New Hampshire, which lost 3,200 payroll positions..

  since July of last year, 33 states saw statistically significant payroll job increases and only Alaska had a small decrease of 1,600 jobs...the map below, from page 20 of the full pdf release, shows the number of jobs added over the previous year as a percentage of total payroll jobs in each state; the unshaded states of Utah, which added 40,500 jobs, and Arizona, which saw payrolls increase by 74,700, saw the largest percentage job gains at over 3.1%, while Washington, Idaho, North Dakota, Colorado, Texas, Mississippi and Georgia all saw non farm payrolls rise by over 2%…meanwhile, those states with the darkest shading below have seen less than a 1.0% increase in payroll jobs…numerically, the largest year over year job increases occurred in Texas at 293,000, California at 236,400 and Florida at 143,700…

July map YoY nonfarm payroll change by state

even though the national unemployment rate fell to 7.4% in July, 28 states and the District of Columbia saw their unemployment rates rise during the month, while only 8 states saw their rate fall; of those states seeing a statistically significant change in the unemployment rate, seven saw increases: Alaska's unemployment rate climbed from 6.0% to 6.3% and Georgia's increased from 8.5% to 8.8%, while California, Iowa, Nebraska, Vermont, and Virginia each saw their unemployment rates tick up 0.2%...meanwhile, Mississippi saw a significant decline in its unemployment rate from 9.0% in June to 8.5% in July...the map below, from a BLS table and map supplement, shows the seasonally adjusted unemployment rates by state as of July...all states are now below the 10% threshold; those in red have unemployment rates above 8.0%, led by Nevada at 9.5%, Illinois at 9.2%, Rhode Island and North Carolina, both at 8.9%, and Michigan and Georgia both with 8.8% unemployment rates, while California, New Jersey, Kentucky and Tennessee all have official rates over 8.5%...on the other end of the spectrum, North Dakota at 3.0% and South Dakota with a 3.9% unemployment rate are shown in yellow...over the year, California’s rate has fallen from 10.6% in July a year ago to 8.7%, Nevada is down from 11.3%, Rhode Island is down from 10.5%, and Florida’s unemployment rate fell from 8.7% last July to 7.1% with this report..

July U3 by state map

(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…)

Wednesday, August 21, 2013

'WHY IN THE WORLD ARE THEY SPRAYING?'

People around the world are noticing that our planet's weather is dramatically changing. They are also beginning to notice the long lingering trails left behind airplanes that have lead millions to accept the reality of chem-trail/Geo-engineering programs. Our innate intelligence tells us these are not mere vapor trails from jet engines, but no one yet has probed the questions: WHO is doing this and WHY.

DEBT COLLECTORS ...coming to a community near you

PART 1
PART 2

Sunday, August 18, 2013

June’s and July’s retail sales, July’s consumer prices and industrial production, & the 2nd quarter report on household debt

  according to the Advance Retail and Food Services Sales Report for July (pdf) from the Census Bureau, the seasonally adjusted advance estimate of retail and food services sales for the month was $424.5 billion, an increase of 0.2 percent (±0.5%)* over June's revised sales of $432.6 billion and 5.4% (±0.7%) above last July's $402.7 billion ...the asterisk tells us that the Census Bureau does not have sufficient statistical evidence to conclude that the actual change in July sales is different than zero, since this widely followed report is just an advance estimate of sales collected by phone, fax or mail from a sample of approximately 4,900 firms and will be revised when more complete data is available next month, and the month thereafter...more specifically, their opening statement means they're 90% confident that seasonally adjusted retail sales for July were between $431.3 billion and $435.6 billion, or between 0.3% less and 0.7% greater than June’s…the unadjusted estimate of July's retails sales was at $427,547 million, up from $421,636 million in June but down from the spring sales high of $444,370 million in May...year to date unadjusted sales, including this preliminary data, is estimated to be $2,896,307 million, which is 4.2% higher than the year to date for the first 7 months of last year...neither the seasonally adjusted figures nor this data is adjusted for price changes..

  the real story of this July retail sales report was not July's weaker than expected 0.2% month over month growth, but the revision of June's sales from a 0.4% increase over May to a 0.6% increase, which was treated as a footnote elsewhere; the fact is that the change to June's earlier estimated sales figures was greater than the entire increase in sales reported for July...as originally reported, the advance estimate of June retail sales was at $422,794 million; that has now been revised to a preliminary $423,649 million, an $855 million correction....July's sales gain of just $832 million to $424,481 million was calculated from that new, revised June baseline...so on net, this report is indicating a larger jump in retail sales than was indicated by last month's headline 0.4% increase with a less than 0.1% downward revision for May...

  moreover, the revisions to June data brought significant revisions to sales in most retail trade sectors vis a vis what we reported last month; on the left below, we have the image of the table showing the sales percentage for the major retail sectors from this month's report; lined up approximately next to that on the right we have the original June percentage table from last months report (archived pdf here); just to clarify the headings, the first estimate of each census report is labeled "advance", the second estimates, a month later, are the "preliminary" report, and the third estimate is called the "revised" report...here below, we see the "advance" estimate of June retail sales on the right showing a 0.4% increase in the top line total retail sales from May (as published last month), and in the middle columns we have the "preliminary" correction to that change from May at 0.6% and to the change from a year earlier at 5.9%...but that's not all; note the change for each of the major retail business types; sales at car dealers, for instance, were originally reported up 2.1% for June; now they're indicated as up 3.3%; on the other hand, for instance, clothing stores had been showing a 0.7% gain over May, but now they show flat sales at 0.0%....

July retail table plus

June advance retail for July

since the revision of the June report actually accounted for more of the increase in July retail sales over what was last reported than the July change, we'll take a brief look at some of the major changes that resulted in that swing...first, as we've already alluded to, June's seasonally adjusted sales at vehicle & parts dealers were originally reported to have risen 1.8% from a seasonally adjusted $79,028 million in May to $80,461 million in June; that's now been revised to an increase of 2.9% from $79,300 million to $81,584 million in June, so combined with the May revision, the increase in June auto sales was rewritten 1.4% higher than it was reported last month...but even with that big jump in revised auto sales, retail sales ex auto still managed to eke out a 0.1% increase, from May's $341,720 million to $342,065 million in June, versus the nearly flat sales increase without autos & parts reported last month, because of additional upward revisions for other retail sales...

two major retail businesses which had been thought to have been off substantially in June weren't as bad as originally reported...at building and garden supply stores, where sales were first reported to have fallen 2.2% to $25,772 million in June from $26,346 million in May, sales actually only fell 1.6%, to $25,909 million from a revised May sales total of $26,330 million; then sales at bars and restaurants, where June's sales were first reported at $45,251 million, 1.2% below May's level of $45,821 million, Junes sales have now been revised to a much smaller decline of 0.5%, from a seasonally adjusted $45,771 million in May to a preliminary sales figure of $45,559 million in June...meanwhile, non-store retailers, who had been thought to have seen sales rise 2.1% from $37,154 million in May to $37,936 million in June, were revised this month to show a 1.5% June sales gain from a much lower revised May figure of $36,739 million to a preliminary sales total of $37,276 million in June...

  so, now that we understand that the widely followed "advance" retail sales estimated this week for July are less than dependable and subject to large revisions (median standard errors and coefficients of variation for various businesses are explained on the last page of the release), we can look at those estimates with an appropriate grain of salt...seasonally adjusted sales at motor vehicle & parts dealers, which account for a bit less than 20% of aggregate retail sales, were down 1.0% in July, from $81,584 million in June to $80,799 million in July; however, unadjusted motor vehicle & parts sales were at $86,010 million, up from June's $82,652 million but down from May's unadjusted $86,431 million, highly suggesting that seasonal adjustments, which anticipated a greater fall in June sales, skewed the reported changes in sales for these businesses over both June and July...seasonally adjusted sales at motor vehicle & parts dealers were still 11.8% higher than last years at $72,284 million, while unadjusted sales for those auto related businesses were 15.0% higher than last July's, which is odd because we had thought July was in the same season this year as it was last year....with the apparent large hit to auto sales, the widely watched retail sales ex-autos, aka "core retail sales" were up 0.5% for the month, from a seasonally adjusted $342,065 million in June to $343,682 million in July...

among retail trade sectors showing better than average adjusted sales increases in July, the broad category of stores specializing in sporting goods, hobbies, books or music saw sales rise 1.0% from $7,421 million in June to $7,498 million, while sales at clothing & accessories stores were up 0.9% from $20,860 million in June to 21,046 million July, and sales at food and beverage stores were up 0.8%, from $53,935 million in June to.$54,355 million in July...in addition, sales at gas stations rose 0.9% from $45,390 million in June to $45,784 million in July as gasoline prices were up 1.0%...year over year sales gains for all of these better than average July retailers, however, was below the 5.4% YoY gain posted for all sales; sales at sporting goods, hobbies, books & music stores was were up just 2.3% from last July, clothing stores saw sales rise 4.2% from a year ago, food and beverage stores posted a one year sales increase of 3.9%, and July sales at gas stations were 4.9% greater than last years..

other than automotive, retail sectors that saw seasonally adjusted sales decrease in July included furniture and home furnishing stores, where sales fell 1.4% to $8,398 million in July, after rising 2.5% to $8,516 million in June; since furniture sales wouldn't seem to be subject to much volatility, this also seems like it may be another seasonal adjustment aberration...July sales at building materials and garden supply stores were down another 0.4% to $25,802 million in July after being down 1.6% to $25,909 million in June, suggesting more of a slowdown in home building and remodeling than is evident from other data; nonetheless, sales for this retail group were still 7.9% above those of a year earlier...meanwhile, sales at electronic and appliance stores were off 0.1%, from $8,411 million in June to $8,402 million in July, and down 0.4% year over year...other than electronic and appliance retailing, only department stores, where sales fell 4.8%, saw worse year over year sales results...

our FRED pie chart below was constructed to give us visual picture of the relative size of each of the component retail business groups included in this report (click on any piece for a large pie); note that since FRED limits us to a maximum of 12 data sets per graph, we have omitted the “miscellaneous store retailers”, which accounted for $10,595 million of sales in July, or less than 2.5% of the total…these retailer groups are arranged around the pie from those with the most sales to those with the least, so in the upper right corner, we have motor vehicle & parts dealers in blue at 19.5% of the remaining sales, and then, counterclockwise from there, general merchandise stores in red at 13.3% of sales ex “other”; food and beverage stores in green, accounting for 13.1% of sales; gas stations in orange and restaurants and bars in grey, both accounting for 11.1% of sales; non-store retailers, or online & mail order sales, in medium blue at 9.0%; building material & garden supply retailers in light green at 6.1%; drug stores in mustard coloring at 5.7%; clothing and accessory stores at 5.1% in pink; electronic and appliance stores in purple and furniture and furnishings stores in yellow, both at 2.0% each; and lastly, stores specializing in sporting goods, hobbies, books or music in light blue accounting for 1.8% of July retail sales, all ex "other"..

,FRED Graph

real retail sales, a oft cited metric, is simply the seasonally adjusted retail sales change adjusted for inflation using the consumer price index for the same period...and this week, as is often the case, saw the release of the Consumer Price Index for All Urban Consumers (CPI-U) for July two days after the July retail sales release; since the CPI also came in 0.2 higher in July, real retail sales for July put up a goose-egg in the records; however, as June retail sales were revised to a to show an increase of 0.6%, and the June CPI increase remained at 0.5%, real retail sales for June are now seen as having risen 0.1%...as we've noted previously, the caveat to this metric is that the CPI includes prices for expenses not included in retail sales, as well as different weightings for components....methodology for computing the CPI, and various components, is here...

while rising gasoline prices accounted for the lion's share of the CPI increase in June, the July increase in prices was broader based, with a number of components contributing...seasonally adjusted gasoline prices were up 1.0%, but that was offset by 0.3% lower prices for electricity and  a 2.8% price reduction in natural gas, resulting in a minor increase of 0.2% for the energy index...food prices were up just 0.1%, as food away from home was up 0.2% and food at home was up 0.1%, as a seasonally adjusted 1.5% increase in prices for fruits and vegetables was offset by a 0.3% decrease in prices for cereal and baked goods and a 0.6% decrease in beverage prices .. the Core CPI, which measures the price change for everything except food and energy, was up by the same 0.2% as the overall index...the unadjusted CPI for July, at 233.596, was statistically unchanged from June's 233.504; all indexes in this report are based on 1982 to 1984 prices equal to 100 unless otherwise noted... 

the cost of shelter, the largest component of the CPI at 31.585% of the total index, was also up 0.2% in July, as the unadjusted shelter index also rose 0.2% from 286.024 to 286.617; rent of primary residence was up 0.1%, owner's equivalent rent was up 0.2%, and prices for lodging away from home was up 0.2%...prices for household commodities were broadly lower, with both window and floor coverings and furniture and bedding 0.6% cheaper, while prices for appliances fell 1.3%...the price of new vehicles was up 0.1% while the price of used cars and trucks fell 0.4%, and transportation services rose 0.4% as the cost of vehicle maintenance and repair rose 0.3%, car insurance rose 1.3% and airline fares fell 1.3%...the transportation services index, which is not seasonally adjusted, rose 0.2% from 286.024 in June to 286.617 in July...prices for medical services rose 0.1% as hospital costs rose 0.3% and prices for physicians services fell 0.2%, while prices for medical commodities rose 0.4% as the major component of prescription drugs rose 0.5% even though prices for medical equipment and supplies fell 0.8%; the combined medical care price index rose by a a little more than 0.1%, from 424.264 in June to 424.836 in July....prices within the broad category of education and communication services were up 0.1% overall, as elementary and high school costs were up 0.6% while prices for internet services and electronic information fell 0.7%...education and communication commodities, meanwhile, were down 0.6%, as computers and peripheral equipment fell 1.6% while prices for textbooks were up 0.5%...prices for apparel, which had been stable most of the past year, rose 0.6% as 2.1% higher prices for women's & girl's apparel more than offset a 1.2% decline in prices for men and boy’s wear and a 0.3% decrease in prices for footwear....recreation equipment prices fell 0.2% as TV prices fell 2.6% and photographic equipment was 3.0% cheaper in July than in June, while prices for recreation services were up just 0.1%, with only movie, theater, and concert tickets seeing an increase as large as 0.6%...the combined unadjusted recreation index, which is based on 1997=100, fell by a statistically insignificant percentage, from 115.407 to 115.384...

the pie graph to the right above is from doug short, and like our retail pie graph, provides us with a visual picture of the relative size of each of the major components of the CPI...we should note that in this rendering, energy components of the energy price index are for the most part included within the housing and transportation wedges of that pie; you'll note that the total index for housing is actually more than 41% of the CPI, and since home prices are not included in that metric, it tends to moderate the CPI...the number of price indexes that BLS generates out of the various CPI components can be confusing, as many overlap; here's a table of over 40 special aggregate indexes, which doesn't even include the specialized sub-category indexes such as for fruits and vegetables...

our FRED graph below captures the track of the major aggregate price indexes shown above going back to 1997, a date chosen because that's when two of those composite indexes originated; the rest represent recent prices based on prices from 1982 to 1084 = 100... the price index for food and beverages is in blue and and the price index for housing is in red, which together account of over half of the CPI and which both have tracked near the overall index since 1982...meanwhile, the apparel index in violet, which is just 3.564% of the CPI, has actually been falling since the 1990s until just recently...the orange line at the top of the chart is the medical care composite index; if you look closely you might notice the moderation in the steady increase in the price of health care everyone's been talking about...next, in light green, we have the volatile transportation index, which reflects the gyrating cost of gasoline and fuel related costs of transportation services, moderated by the slow steady rise in the cost of vehicles; lastly, we have our two indexes benchmarked to 1997: education and communication in dark green and recreation in bright blue, neither of which has risen much over that shorter timespan...

FRED Graph

another key release of the past week was on Industrial production and Capacity Utilization for July from the Fed, which showed that the seasonally adjusted industrial production index, which is benchmarked to  2007 = 100, was unchanged from the June reading of 98.9...the manufacturing index, the major component of the overall index, was down for the first time in three months, 0.1% lower than June at 95.6, while the utilities index, reflecting less than normal use of air conditioning, was down 2.1%, and the output of "mines" saw a 2.1% increase to 120.3, reflecting record high gas and oil extraction in July...the overall index has not moved much over the last 6 months, as it read 98.8 at the end of February, again with both manufacturing and utility output lower over 6 months while the mining component rose...the manufacturing slowdown is only recently, however, as over the past year manufacturing has seen a 1.3% increase, boosting the industrial composite index to a 1.4% year over year increase, as "mining" output grew 5.7% while utility output shrunk 3.7% from last year...

FRED Graph

in addition to the indexes for those major industry groups, this report also indexes industrial production by market group; the index for production of consumer goods, which accounts for 27.14% of the total industrial production index, fell 0.5% in July to 94.1, which was the same index reading as February's; production of non-durable goods fell 1.5% as automotive products production fell 2.4% in July and output of home electronics was off 1.0%, while the index for consumer nondurables slipped 0.2% as a 0.3% increase in output of consumer energy products was offset by a 0.6% decline in clothing production and a 0.9% fall in paper products output...output of consumer goods is now 1.3% higher than it was last July, with most of that growth taking place last year; durable goods production was up 5.0% over the year, bolstered by double digit annualized growth rates in automotive products over the last three quarters, while production of consumer non-durables was up 0.3% as output of non-energy nondurables fell 0.1% since July of last year...

production of business equipment, which accounts for 9.61% of the industrial production index, was unchanged in July but is still 2.1% higher than a year ago; the production of information processing equipment fell 0.7%, while the index for transit equipment was unchanged and the index for industrial and other equipment was up 0.2%; in addition, production of defense and space equipment rose 1.0%, the first monthly increase since last year in that index as a preliminary 0.1% gain in June was revised to show a 0.1% decrease...meanwhile, the output of construction supplies increased 0.5% and is now 4.4% above a year ago, while July production of business supplies declined 0.7%, turning the year over year figures negative at -0.5%...production of materials to be processed further, which accounts for 46.54% of industrial output, saw a 0.4% increase in July and was 1.7% higher than a year ago; these were bolstered by a 1.2% increase in the output of energy materials due to gains in oil and natural gas extraction...inputs into durable goods were unchanged, as a 0.7% decline in output of equipment parts offset a 0.3% increase in consumer durable parts and a 1.0% increase in other durable goods inputs, while production of nondurable materials was down 0.5% due to 1.3% lower textiles output, 0.8% less paper production, and a 0.7% decrease in chemical materials output....

capacity utilization for total industry was down 0.1 percentage point to 77.6% in July; this is the percentage of our plant and equipment that was in use during the month, and it was being used at a 0.3% lower rate than a year ago; manufacturing utilization declined 0.1% to 75.8%, while the operating rate for mining equipment, including drilling rigs, rose 1.5 percentage points to 89.5%; meanwhile capacity utilization by utilities declined 1.6% to 76.2%, a rate 10.0% below its long-run average...utilization at the crude stage of processing increased 0.9% to 87.4%, while primary and semifinished stage utilization declined 0.2% to 75.5% and finished stage utilization fell 0.5% to 75.6%...our FRED graph for this release, the the right above, shows capacity utilization for total industry in pink since January 2005, expressed on the scale as a percentage of capacity in use; on the same graph we have the industrial production indexes over the same period, using the same scale on the left based on index values in 2007=100...the production index for all industry is in black, while the manufacturing production index is in blue, the utility production index is in green, and the mining production index, driven by gas and oil production, is in red...

   the 2nd Quarter Report on Household Debt and Credit (pdf) from the NY Fed is another of those reports that tells it's story mostly in graphics, although the NY Fed has an accompanying press release and a blog post discussing the rise of subprime auto loans, which now number more than home loans, but have not yet reached the proportions seen before the crisis...much of the detail in this report is not a surprise, ie, that housing related debt is declining and that student loan debt is rising, but in that this broad sweep covers much of the same data we've seen in other reports, such as the G19s on Consumer Credit and the privately issued LPS Mortgage Monitor, it's interesting to put bring it all type of debt together in one place and in context...the data in this report is derived from the NY Fed's own consumer credit panel and drawn from anonymous Equifax credit data..

according to the NY Fed, outstanding consumer credit fell $78 billion from $11.23 trillion to $11.15 trillion at the end of the 2nd quarter, a decline of 0.7% from the 1st quarter...mortgage balances fell by $91 billion, or 1.1%, to $7.84 trillion, and home equity lines of credit decreased by $12 billion, or 2.2%, to $540 billion, while the non-housing components of household debt increased 0.9%; total credit card debt was up $8 billion to $668 billion, outstanding student loan debt increased $8 billion to $994 billion, and auto loan balances increased $20 billion to $814 billion, the largest quarterly increase in auto loans since 2006...these components are shown graphically in the bar graph below from page 5 of the report, which shows the components of total debt for each quarter since the beginning of 2003…the bar at the far right represents the 2nd quarter and shows mortgage debt in orange has continued to shrink and now represents 71% of household debt…meanwhile home equity loans in purple accounted for 5% of 2nd quarter debt, auto loans in green accounted for 7%, credit card debt in blue accounted for 6%, and student loans in red have now risen to 9% of the total debt outstanding..(uncategorized debt in grey is 3% of the total)...we should note that this report does not distinguish between mortgage debt that has been paid off and mortgage debt that has been extinguished through a foreclosure or a short sale...
NY Fed Total Household Debt Composition

   the next graph below, from page 10 of the report, shows the percentage of all that debt for each of those years that was either current or delinquent during the given quarter; in each bar the percentage of loans by dollar value that is current is represented by the dark green, while the percentage of debt that is more than 30 but less than 60 days delinquent is shown in green, while the percentage over 60 days overdue is shown in blue, over 90 days unpaid debt in yellow, and the percentage of debt over 120 days in arrears is shown in orange...the red in each column represents the percentage of debt in that quarter which was severely derogatory, which includes foreclosures, debt referred to a third party for collection, or debt charged off as bad debt...roughly $845 billion of 2nd quarter debt was delinquent, with $635 billion of that seriously delinquent, or more than 90 days behind in payments...as of the end of June, 7.6% of all debt was in some stage of delinquency, compared to the 8.1% delinquency rate at the end of the first quarter...the 90+ day delinquent balances of student loan debt that made this report newsworthy the past two quarters moderated, as seriously delinquent student debt fell from 11.2% of that outstanding in Q1 to 10.9% in the 2nd quarter...if we compare this graph to the mortgage delinquency and foreclosure graph from the MBA we saw last week, it's fairly clear that the delinquency status shown here over time aligns fairly closely with that of the mortgage debt for the corresponding quarters..

NY fed Household debt by delinquency

NY Fed Household Debt collections

next, the adjacent chart, from page 17 of the pdf report, shows the percentage of consumer loans that have been referred to a 3rd party for collection in blue, and the average size of such loans for each quarter since the first quarter of 2003 in red; this is surprising on two counts; first, that well over 14% of loans are now in the hands of a collection agency or lawyer, and second, that the average loan balance that is referred for collection is comparatively low, now near $1400..much of this is said to be medical debt; we would have thought the average amounts collectors were making the effort to go after would be higher…

the 2nd half of the report (after page 18) is a series of charts for selected states; 12 states are included on each graph, and those chosen appear to be the 10 largest states plus Arizona and Nevada, the two states at the center of the housing bust and subsequent mortgage debt crisis...pages 21 and 22 have the equivalent of the two charts above broken down by state; the first graph we'll include here below is from page 20 of the pdf report and it shows the total debt outstanding per capita for each of those 12 selected states...we can note that both California in red and Nevada in dark blue peaked near $90,000 per capita debt, and now both states, which have seen significant foreclosures and distressed home sales, are well off their peaks; however, not much has changed in New Jersey, another high debt but judicial state in green, where foreclosures are moving so slowly it would take over 40 years at the current pace to process them all...also note that outstanding debt per capita in Ohio, Michigan, Pennsylvania, and Texas never got much over $40,000 per capita, and outstanding per capita debt hasn't fallen much for any of them during this so-called deleveraging period either...

NY Fed Debt per capita by state

the next chart below, from page 24 of the report, shows the percentage of mortgage debt in each of our selected states that was 90 or more days delinquent in each quarter since 2003...again, not surprising that both Nevada and Florida saw seriously delinquent mortgage debt peak at over 20% of all housing related debt outstanding in those states, nor that both are still showing more than 12% of the mortgage loan amounts outstanding not currently being paid back..note that the percentage of seriously delinquent mortgage debt is increasing this year in both New York and New Jersey, and is now over 9% for both.. we saw last week that LPS showed that nearly half the states still have over 10% of their mortgages in some stage of delinquency in June, and that the MBA showed a seriously delinquency rate of 5.88% at the end of the 2nd quarter ...the metric shown here is a bit different than those in the LPS and MBA mortgage delinquency data, in that they give the percentage of loans in trouble, whereas the chart below shows the percentage of aggregate mortgage debt in dollars that has been unpaid for 90 days or more...

NY Fed 90 day mortgage by state

lastly, we'll include this graph of the percentage of new bankruptcies by state, which comes from page 28 of the pdf report, and note that bankruptcies appear to have increased in every state graphed (and nationally, too, as per the national graph on page 16); the NY Fed makes no comment on this uptick, but only notes that 380,000 consumers had a bankruptcy notation added to their credit reports in 2013 Q2, a 4.8% drop from the same quarter a year earlier...there may be a seasonal pattern in bankruptcies at work here, but the chart is a bit too noisy to accurately discern that...

NY Fed bankruptcies by state

(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…)

Monday, August 12, 2013

AMERICA'S DESCENT INTO MADNESS / The Politics of Cruelty

 by HENRY GIROUX
America has entered one of its periods of historical madness, but this is the worst I can remember: worse than McCarthyism, worse than the Bay of Pigs and in the long term potentially more disastrous than the Vietnam War.
– John le Carré
America is descending into madness. The stories it now tells are filled with cruelty, deceit, lies, and legitimate all manner of corruption and mayhem.  The mainstream media spins stories that are largely racist, violent, and irresponsible —stories that celebrate power and demonize victims, all the while camouflaging its pedagogical influence under the cheap veneer of entertainment. Unethical grammars of violence now offer the only currency with any enduring value for mediating relationships, addressing problems, and offering instant pleasure. A predatory culture celebrates a narcissistic hyper-individualism that radiates a near sociopathic lack of interest in or compassion and responsibility for others. Anti-public intellectuals dominate the screen and aural cultures urging us to shop more, indulge more, and make a virtue out of the pursuit of personal gain, all the while promoting a depoliticizing culture of consumerism. Undermining life-affirming social solidarities and any viable notion of the public good, right-wing politicians trade in forms of idiocy and superstition that mesmerize the illiterate and render the thoughtful cynical and disengaged.   Military forces armed with the latest weapons from Afghanistan play out their hyper-militarized fantasies on the home front by forming robo SWAT teams who willfully beat youthful protesters and raid neighborhood poker games.  Congressional lobbyists for the big corporations and defense contractors create conditions in which war zones abroad can be recreated at home in order to provide endless consumer products, such as high tech weapons and surveillance tools for gated communities and for prisons alike.
The issue of who gets to define the future, own the nation’s wealth, shape the reach of state resources, control of the global flows of goods and humans, and invest in institutions that educate an engaged and socially responsible citizens has become largely invisible.  And yet these are precisely these issues that offer up new categories for defining how matters of representations, education, economic justice, and politics are to be defined and fought over. The stories told by corporate liars and crooks do serious harm to the body politic, and the damage they cause together with the idiocy they reinforce are becoming more apparent as America descends into authoritarianism, accompanied by the pervasive fear and paranoia that sustains it.
The American public needs more than a show of outrage or endless demonstrations. It needs to develop a formative culture for producing a language of critique, possibility, and broad-based political change. Such a project is indispensable for developing an organized politics that speaks to a future that can provide sustainable jobs, decent health care, quality education, and communities of solidarity and support for young people. At stake here is a politics and vision that informs ongoing educational and political struggles to awaken the inhabitants of neoliberal societies to their current reality and what it means to be educated not only to think outside of a savage market-driven commonsense but also to struggle for those values, hopes, modes of solidarity, power relations, and institutions that infuse democracy with a spirit of egalitarianism and economic and social justice. For this reason, any collective struggle that matters has to embrace education as the center of politics and the source of an embryonic vision of the good life outside of the imperatives of predatory capitalism. As I have argued elsewhere, too many progressives are stuck in the apocalyptic discourse of foreclosure and disaster and need to develop what Stuart Hall calls a “sense of politics being educative, of politics changing the way people see things.” This is a difficult task, but what we are seeing in cities that stretch from Chicago to Athens, and other dead zones of capitalism throughout the world is the beginning of a long struggle for the institutions, values, and infrastructures that make critical education and community the core of a robust, radical democracy.  This is a challenge for young people and all those invested in the promise of a democracy that extends not only the meaning of politics, but also a commitment to economic justice and democratic social change.
The stories we tell about ourselves as Americans no longer speak to the ideals of justice, equality, liberty, and democracy. There are no towering figures such as Martin Luther King, Jr. whose stories interweave moral outrage with courage and vision and inspired us to imagine a society that was never just enough.  Stories that once inflamed our imagination now degrade it, overwhelming a populace with nonstop advertisements that reduce our sense of agency to the imperatives of shopping. But these are not the only narratives that diminish our capacity to imagine a better world. We are also inundated with stories of cruelty and fear that undermine communal bonds and tarnish any viable visions of the future. Different stories, ones that provided a sense of history, social responsibility, and respect for the public good, were once circulated by our parents, churches, synagogues, schools, and community leaders. Today, the stories that define who we are as individuals and as a nation are told by right-wing and liberal media that broadcast the conquests of celebrities, billionaires, and ethically frozen politicians who preach the mutually related virtues of the free market and a permanent war economy.
These neoliberal stories are all the more powerful because they seem to undermine the public’s desire for rigorous accountability, critical interrogation, and openness as they generate employment and revenue  for by right-wing think tanks and policy makers who rush to fill the content needs of corporate media and educational institutions. Concealing the conditions of their own making, these stories enshrine both greed and indifference encouraging massive disparities in wealth and income. In addition, they also sanctify the workings of the market, forging a new f political theology that inscribes a sense of our collective destiny to be governed ultimately and exclusively by market forces. Such ideas surely signal a tribute to Ayn Rand’s dystopian society, if not also a rebirth of Margaret Thatcher’s nonfiction version that preached the neoliberal gospel of wealth:  there is nothing beyond individual gain and the values of the corporate order.
The stories that dominate the American landscape embody what stands for commonsense among market and religious fundamentalists in both mainstream political parties:  shock-and-awe austerity measures; tax cuts that serve the rich and powerful and destroy government programs that help the poor, elderly, and sick; attacks on women’s reproductive rights; attempts to suppress voter ID laws and rig electoral college votes;  full-fledged assaults on the environment; the militarization of everyday life; the destruction of public education, if not critical thought itself;  an ongoing attack on unions, on social provisions, and on the expansion of Medicaid and meaningful health care reform. These stories are endless, repeated by the neoliberal and neoconservative walking dead who roam the planet sucking the blood and life out of everyone they touch—from the millions killed in foreign wars to the millions incarcerated in our nation’s prisons.
All of these stories embody what Ernst Bloch has called “the swindle of fulfillment.” That is, instead of fostering a democracy rooted in the public interest, they encourage a political and economic system controlled by the rich, but carefully packaged in consumerist and militarist fantasy. Instead of promoting a society that embraces a robust and inclusive social contract, they legitimate a social order that shreds social protections, privileges the wealthy and powerful and inflicts a maddening and devastating set of injuries upon workers, women, poor minorities, immigrants, and low- and middle-class young people.  Instead of striving for economic and political stability, they inflict on Americans marginalized by class and race uncertainty and precarity, a world turned upside-down in which ignorance becomes a virtue and power and wealth are utilized for ruthlessness and privilege rather than a resource for the public good.
Every once in a while we catch a brutal glimpse of what America has become in the narratives spun by politicians whose arrogance and quests for authority exceed their interest to conceal the narrow-mindedness, power-hungry blunders, cruelty, and hardship embedded in the policies they advocate.  The echoes of a culture of cruelty can be heard in politicians such as Senator Tom Coburn, a Republican from Oklahoma, who believes that even assistance to those unemployed, homeless, and working poor suffering the most in his home state should be cut in the name of austerity measures.  We hear it in the words of Mike Reynolds, another politician from Oklahoma who insists that government has no responsibility to provide students with access to a college education through a state program “that provides post-secondary education scholarship to qualified low-income students.” We find evidence of a culture of cruelty in numerous policies that make clear that those who occupy the bottom rungs of American society—whether low-income families, poor minorities of color and class, or young, unemployed, and failed consumers—are considered disposable, utterly excluded in terms of ethical considerations and the grammar of human suffering.
In the name of austerity, budget cuts are enacted that fall primarily on those individuals and groups who are already disenfranchised, and will thus seriously worsen the lives of those people now suffering the most.  For instance, Texas has enacted legislation that refuses to expand its Medicaid program, which provides healthcare for low-income people.  As a result, healthcare coverage will be denied to over 1.5 low-income residents as a result of Governor Perry’s refusal to be part of the Obama administration’s Medicaid expansion. This is not merely partisan politics; it is an expression of a new form of cruelty and barbarism now aimed at those considered disposable in a neo-Darwinian survival-of-the-fittest society.  Not surprisingly, the right-wing appeal to job-killing and provision-slashing austerity now functions as an updated form of medieval torture, gutting myriad of programs that add up to massive human suffering for the many and benefits for only a predatory class of neo-feudal bankers, hedge fund managers, and financiers that feed off the lives of the disadvantaged.
The general response from progressives and liberals does not take seriously the ways in which the extreme right-wing articulates its increasingly pervasive and destructive view of American society. For instance, the views of new extremists in Congress are often treated, especially by liberals, as a cruel hoax that is out of touch with reality or a foolhardy attempt to roll back the Obama agenda. On the left, such views are often criticized as a domestic version of the tactics employed by the Taliban—keeping people stupid, oppressing women, living in a circle of certainty, and turning all channels of education into a mass propaganda machine of fundamentalist Americanism. All of these positions touch on elements of a deeply authoritarian agenda. But such commentaries do not go far enough. Tea Party politics is about more than bad policy, policies that favor the rich over the poor, or for that matter about modes of governance and ideology that represent a blend of civic and moral turpitude. The hidden order of neoliberal politics in this instance represents the poison of neoliberalism and its ongoing attempt to destroy those very institutions whose purpose is to enrich public memory, prevent needless human suffering, protect the environment, distribute social provisions, and safeguard the public good. Within this rationality, markets are not merely freed from progressive government regulation, they are removed from any considerations of social costs. And where government regulation does exits, it functions primarily to bail out the rich and shore up collapsing financial institutions and for what Noam Chomsky has termed America’s only political party, “the business party.”  The stories that attempt to cover over America’s embrace of historical and social amnesia at the same time justify authoritarianism with a soft-edge and weakens democracy through a thousand cuts to the body politic.  How else to explain the Obama administration’s willingness to assassinate American citizens allegedly allied with terrorists, secretly monitor the email messages and text messages of its citizens, use the NDAA to arrest and detain indefinitely American citizens without charge or trial, subject alleged spies to an unjust military tribunal system, use drones as part of a global assassination campaign to arbitrarily kill innocent people, and then dismiss such acts as collateral damage. As Jonathan Turley points out, “An authoritarian nation is defined not just by the use of authoritarian powers, but by the ability to use them. If a president can take away your freedom or your life on his own authority, all rights become little more than a discretionary grant subject to executive will.”
At the heart of neoliberal narratives are ideologies, modes of governance, and policies that embrace a pathological individualism, a distorted notion of freedom, and a willingness both to employ state violence to suppress dissent and abandon those suffering from a collection of social problems ranging from dire poverty and joblessness to homelessness. In the end, these are stories about disposability in which growing numbers of groups are considered dispensable and a drain on the body politic, the economy, and the sensibilities of the rich and powerful. Rather than work for a more dignified life, most Americans now work simply to survive in a survival-of-the-fittest society in which getting ahead and accumulating capital, especially for the ruling elite, is the only game in town. In the past, public values have been challenged and certain groups have been targeted as superfluous or redundant. But what is new about the politics of disposability that has become a central feature of contemporary American politics is the way in which such anti-democratic practices have become normalized in the existing neoliberal order. A politics of inequality and ruthless power disparities is now matched by a culture of cruelty soaked in blood, humiliation, and misery. Private injuries not only are separated from public considerations such narratives, but narratives of poverty and exclusion have become objects of scorn. Similarly, all noncommercial public spheres where such stories might get heard are viewed with contempt, a perfect supplement to the chilling indifference to the plight of the disadvantaged and disenfranchised.
Any viable struggle against the authoritarian forces that dominate the United States must make visible the indignity and injustice of these narratives and the historical, political, economic, and cultural conditions that produce them.  This suggests a critical analysis of how various educational forces in American society are distracting and miseducating the public. Dominant political and cultural responses to current events—such as the ongoing economic crisis, income inequality, health care reform, Hurricane Sandy, the war on terror, the Boston Marathon bombing, and the  crisis of public schools in Chicago, Philadelphia, and other cities—represent flashpoints that reveal a growing disregard for people’s democratic rights, public accountability, and civic values. As politics is disconnected from its ethical and material moorings, it becomes easier to punish and imprison young people than to educate them. From the inflated rhetoric of the political right to market-driven media peddling spectacles of violence, the influence of these criminogenc and death-saturated forces in everyday life is undermining our collective security by justifying cutbacks to social supports and restricting opportunities for democratic resistance. Saturating mainstream discourses with anti-public narratives, the neoliberal machinery of social death effectively weakens public supports and prevents the emergence of much-needed new ways of thinking and speaking about politics in the twenty-first century. But even more than neutralizing collective opposition to the growing control and wealth of predatory financial elites—which now wield power across all spheres of U.S. society—responses to social issues are increasingly dominated by a malignant characterization of marginalized groups as disposable populations. All the while zones of abandonment accelerate the technologies and mechanisms of disposability. One consequence is the spread of a culture of cruelty in which human suffering is not only tolerated, but viewed as part of the natural order of things.
Before this dangerously authoritarian mindset has a chance to take hold of our collective imagination and animate our social institutions, it is crucial that all Americans think critically and ethically about the coercive forces shaping U.S. culture—and focus our energy on what can be done to change them. It will not be enough only to expose the falseness of the stories we are told. We also need to create alternative narratives about what the promise of democracy might be for our children and ourselves. This demands a break from established political parties, the creation of alternative public spheres in which to produce democratic narratives and visions, and a notion of politics that is educative, one that takes seriously how people interpret and mediate the world, how they see themselves in relation to others, and what it might mean to imagine otherwise in order to act otherwise.  Why are millions not protesting in the streets over these barbaric policies that deprive them of life, liberty, justice, equality, and dignity? What are the pedagogical technologies and practices at work that create the conditions for people to act against their own sense of dignity, agency, and collective possibilities?  Progressives and others need to make education central to any viable sense of politics so as to make matters of remembrance and consciousness central elements of what it means to be critical and engaged citizens.
There is also a need for social movements that invoke stories as a form of public memory, stories that have the potential to move people to invest in their own sense of individual and collective agency, stories that make knowledge meaningful in order to make it critical and transformative. If democracy is to once again inspire a populist politics, it is crucial to develop a number of social movements in which the stories told are never completed, but are always open to self- and social reflection, capable of pushing ever further the boundaries of our collective imagination and struggles against injustice wherever they might be.  Only then will the stories that now cripple our imaginations, politics, and democracy be challenged and hopefully overcome.

Henry A. Giroux currently holds the Global TV Network Chair Professorship at McMaster University in the English and Cultural Studies Department and  a Distinguished Visiting Professorship at Ryerson University. His most recent book is  The Educational Deficit and the War on Youth (Monthly Review Press, 2013), His web site is www.henryagiroux.com

Sunday, August 11, 2013

the MBA & LPS on delinquent mortgages & foreclosure inventories at mid year; June’s trade deficit

this week saw the release of both of the major national reports that track the condition of US home mortgages, coincidentally as of the last day of June, giving us an opportunity to compare them side by side, which should give us a better picture of the overall situation....we should note they're not directly comparable, however, because the Mortgage Bankers Association’s (MBA) 2nd quarter National Delinquency Survey is issued quarterly and is seasonally adjusted, whereas the June Mortgage Monitor (pdf) from Lender Processing Services (LPS) is a report issued monthly that is not seasonally adjusted...on previous occasions where their release has coincided, we've noted that the MBA has tended to show slightly higher delinquency rates than LPS; that's also true this time, though it's interesting to note that this end quarter they're converging, as the MBA report has mortgage delinquencies down slightly, whereas LPS shows a substantial jump in late house payments in June, turning their 3 month delinquency figures negative...the MBA also notes that the improvement they show in seriously delinquent mortgage percentages may be slightly less than they indicate because "at least one large specialty servicer that has received a number of loan transfers did not participate in the MBA survey"

MBA Delinquency by Period

according to the MBA, the national delinquency rate, or the percentage of homeowners who were late at least one house payment late but not in foreclosure, declined to a seasonally adjusted 6.96% of all loans outstanding at the end of the second quarter of 2013, down from 7.25% at the end of the first quarter, and down from a delinquency rate of 7.58% a year ago, and the lowest level since mid-2008...the percentage of mortgages that were in the foreclosure process, or those who've had foreclosure proceedings initiated against them but have not yet had their home seized, also fell over the quarter to 3.33% of all mortgages, from 3.55% at the end of the first quarter, and down from the foreclosure inventory rate of 4.27% one year ago; new foreclosures were started on just 0.64% of mortgages in the 2nd quarter, down from 0.70% in the first quarter and from 1.42% of all properties at the September  2009 foreclosure peak...the seasonally adjusted "serious delinquency rate", which includes those who more than 90 days delinquent in addition to those in the foreclosure process, was at 5.88% at the end of the quarter, down from 6.39% at the the end of the first quarter and a decrease from the 7.31% serious delinquency rate of a year ago...combined with those who have missed at least one mortgage payment, the total of all delinquent or in foreclosure mortgages at the end of march amounted to 10.29% of all mortgages on an seasonally adjusted bases, and 10.13% on an unadjusted basis, so despite the continual improvement in the overall delinquency rate, there were still more than one in ten homeowners who were behind on housepayments at the end of June...

the above bar graph from Bill McBride gives us a picture of what the relative size of each of the so-called delinquency “buckets” from the MBA survey looks like over time; each bar represents the percentage of homes delinquent or in foreclosure at the end of each quarter since the beginning of 2005, with the percentage more than 30 but less than 60 days behind on their housepayments color coded purple, the percentage more than 60 but less than 90 days delinquent in blue, the percentage that are seriously delinquent, ie, more than 90 days behind but not yet in foreclosure in yellow, and the percentage of those that are in the foreclosure process in red....it's clear that the total of all delinquent or in foreclosure homeowners is down considerably from the record 14.69% of all mortgages that the MBA survey showed in the first quarter of 2010, but still well above the 5.5% to 5.7% range of troubled mortgages common before the crisis..

the next graph, from the MBA, shows the percentage of mortgages in the foreclosure process by state, with the states that have a judicial foreclosure process, where the bank must prove their right to foreclose on a homeowner in court, coded in dark navy, and those states with a non-judicial foreclosure process shown in red...obviously, the judicial process has slowed foreclosures down in those states that have it; the MBA gives the average foreclosure inventory in judicial states at 5.59% of all mortgages in those states, compared to a ratio of 1.86% of all mortgages for non-judicial states...Nevada, the only non-judicial state in the top dozen with the highest foreclosure inventories, 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 slowed foreclosures in that state to a near standstill....the states showing the largest foreclosure inventories are Florida at 10.58%, down from 11.43% in the first quarter, New Jersey at 8.01%, down from 9.00% in the last report, New York at 6.09%, down from 6.18%, and Maine at 5.62% down from 5.80%...meanwhile other states that have experienced significant foreclosures, such as California, with a foreclosure inventory rate of 1.64%, and Arizona at 1.51%, have a much smaller backlog because without the judicial process the banks can proceed on homeowners with impunity..

MBA Q2 2013 foreclosures by state

in contrast to the MBA survey, which showed delinquencies down to 6.96%, the June Mortgage Monitor (pdf) from Lender Processing Services (LPS) showed that new mortgage delinquencies spiked up 18.3% in June, after declining 5 months in row, raising their national mortgage delinquency rate to 6.68% from the mortgage crisis low of 6.08% in May...data from LPS showed that the nearly 10% jump in the national delinquency rate in June was largely the result of approximately 700,000 homeowners who were current on their mortgages in May falling behind by one payment in June...the deterioration in mortgages delinquencies was widespread, as the newly delinquent rate rose by more than 10% in all 50 states and did not seem to be the result of higher interest rates, as the delinquency rate for those with 30 year fixed rate mortgages increased at a slightly quicker pace than that for those with adjustable rate mortgages...

Of 49,823,992 active mortgages in June, LPS reported that 4,785,000 home loans, or 9.61% of all first lien mortgages, were at least one payment delinquent or in foreclosure at the end of June; of those, 1,983,000 homes loans were at least 30 days but less than 90 days late; another 1,344,818 mortgages were 90 or more days delinquent, but not yet in foreclosure, and 1,458,000 properties, were in the foreclosure process, ie, they had received at least one notice but their home had not yet been seized....that foreclosure inventory was down from 1,335,000 in May, and at 2.93% of all mortgages, represents the first time homes in foreclosure fell below 3% of tracked properties since early 2009...there were 109, 042 foreclosure starts in June, the lowest monthly number of new foreclosures in a month since the crisis began..

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as most of the mortgage monitor is a graphic presentation, we'll have to looks at some of those to see the rest of the story...our first graph is from page 4 of the mortgage monitor pdf and tracks with a green line the percentage of active home loans that have been in the foreclosure process, also known as the foreclosure inventory, from 1995 to the present...these are the home loans in between the time the servicer's attorney first initiates the foreclosure and the "foreclosure sale", which typically transfers title to the bank (terminology is on page 25 and 26 of the pdf)... at 2.93% of home mortgages outstanding, we can see that's down considerably from the October 2011 peak of 4.29%, but still nearly six times the 0.44% foreclosure inventory of pre-crisis December 2005...then in red, this graph tracks the percentage of loans that have been delinquent monthly over the same period, where we can see this June’s spike to 6.68% delinquent, following the largest year to date decline in delinquencies since 2002...you can also note the seasonality of delinquencies, where they usually peak at year end, when most people get overextended during the holidays, and then decline over the first few months of each year as homeowners catch up...even at 6.68%, June's delinquency rate is still below the 7.17% rate of December 2012, when many homeowners put holiday shopping ahead of their housepayments, and still well below the peak percentage of 10.57% registered in January 2010, although it remains roughly 50% over the pre-crisis level, marked on the chart at 4.27% in December 2005...

  the map below, from page 5, shows the percentage of new delinquencies by state; ie, those who were current on their mortgage in May but fell behind in June; unfortunately, the percentages even on the original map are difficult to read, but what the map shows is that all 50 states chalked up a new delinquency rate well over 10%, ranging from a low of 13.9% new mortgage delinquencies in Nevada to as high as 31.7% new delinquencies in Colorado and a 29.6% jump of those newly behind on their housepayments in Utah...the darker the pink, the greater the percentage of new 30 day delinquencies; note that every state except Connecticut in the Northeast saw an increase of more than 20% in new mortgage delinquencies, as did Wisconsin, Illinois, Minnesota, North & South Dakota, Nebraska, Oklahoma, Idaho, New Jersey and South Carolina...

June LPS new delin by state 2

June LPS delinquent by loan type

next, the adjacent chart, from page 6 of the mortgage monitor, serves to show that the increase in delinquencies in June was not interest rate driven, because the increase in delinquencies for those with 30 year fixed rate mortgages, shown in blue, at 19% month over month, was greater than the 18% month over month increase for those with adjustable rate mortgages, shown in red...but you will note on this chart that ARMs have been consistently more delinquent than the 30 year mortgages, and new delinquencies in ARMs at 3.65% in June outpaced new delinquencies in 30 day mortgages at 2.87%….

then in our next graph below, from p 7 of the mortgage monitor, we'll see that it was not just new delinquencies, but every delinquency bucket that increased in June..this graph tracks the month over month change in quantity of mortgages of each delinquency range from the beginning of 2008 to the present; in blue we see the number of mortgages in each month that were current in the previous month that fell behind in that month; as LPS pointed out, there were over 700,000 new delinquent mortgages in June, which you see in the spike at the end of the graph; we'll note that the 30 day delinquency bucket increased from 1,243,194 in May to 1,471,134 in June, so that means over 450,000 other mortgagees who were 30 days late in May either caught up or fell further behind in June... in red, we have the number of those mortgages that went from over 30 days in arrears to over 60 days late; those between 60 and 90 days delinquent went from 465,129 in May to 511,731 in June..and in green in the chart below we have shown the homeowners who went from 60 days delinquent to 90 days behind each month; in June, those seriously delinquent mortgages increased to 1,344,818 from 1,334,660 in May...finally, in purple below, we see the percentage that were seriously delinquent that had foreclosure proceedings initiated against them was down in June, and as we noted earlier, the 109,042 foreclosures initiated in June was the lowest monthly new foreclosures since before 2008...

June LPS bucket changes

the next graph, from page 8, shows that the deterioration in homeowner's mortgage payment situations in June also affected the number of delinquent mortgages that "cured", or those who were delinquent who got caught up during each month...in red, we have graphed the number homeowners who were one to two months behind on payments who caught up on their payments each month; which collapsed to a five year low in June...although LPS doesn't provide the data, it also appears the same is true for those who were 3 to 5 months behind, as the violet line on that graph representing that cure bracket also seems to be at a 5 year low....meanwhile, the number of those who were more than 6 months delinquent who got caught up in June, as indicated by the teal blue graph, also appears to be at it's lowest level since early 2012...note the number of cures for these last two is on the left scale, while it's on the right for the short term delinquencies... 

June LPS monthly cures

despite this obvious deterioration in June mortgages, LPS Applied Analytics Senior Vice President Herb Blecher tried to spin it into a seasonal phenomena in the press release accompanying the release of the mortgage monitor, noting that payment situations deteriorated in June in all but 4 of the past 18 years...this may be true, but looking back over the record, we dont see a single month in the past two years that saw this large an increase in 30 day delinquencies; as we noted, the 30 day bucket saw an increase of 227,940 mortgages in June (from 1,243,194 to 1,471,134); last June's increase was from 1,390,010 to 1,464,660, only one third that of this June's at 74,960, and the delinquency rate increase in June 2011 was just 2.4%...even the infamous September spike in mortgage delinquencies accompanying the release of the iphone 5 was smaller at 219,998 new delinquencies...we did see June spending outpaced incomes by a bit last week, yet there is nothing else obvious in June data that we've seen to date that could have precipitated this apparent shortfall of homeowner budgets that would cause such a widespread and precipitous increase in new delinquencies...

June LPS foreclosure inventory judicial vs not

we also want to take a look at some LPS graphics regarding the foreclosure inventory in judicial and non-judicial states, to compare to similar data we saw from the MBA….this next graph, to the right, from page 16 of the mortgage monitor, shows the foreclosure inventory as a percentage of all mortgages since the beginning of 2008...you'll recall these are those homes that are stuck in the foreclosure process but have not yet been seized...the blue track on the graph shows the percentage of homes in judicial states that are in the foreclosure pipeline, now down to 4.91%, after having peaked at 6.60% in January of 2012...the red line tracks the percentage of home mortgages in non-judicial states that were in the foreclosure process; this is now down to 1.50%, after having peaked at 2.97% in December of 2010...the black line is simply the national average, now at 2.93%..

meanwhile, the graph below, from page 15 of the mortgage monitor, shows the percentage of this foreclosure inventory that has proceeded to the next step each month, which is euphemistically referred to a a foreclosure sale, where the home is usually auctioned back to the bank in lieu of the unpaid mortgage debt and becomes part of their REO inventory (Real Estate Owned -- terminology is on page 25 of the pdf)...as the red track representing non-judicial states shows, without court intervention this has historically proceeded quite rapidly, from home seizure rates above 12% of all foreclosure inventory early on in the crisis to the recent rate of 6.31% in June, which was up 15.16% from May's rate...the blue line shows the percentage of homes in judicial states that are in foreclosure which have been seized each month; you can see it dropped well below 2% when foreclosure fraud was in the news a few years back, but it's now crept back up to over 3% at 3.02% of all foreclosed homes as of June, 6.74% more than May's rate...

June LPS foreclosure sales judicial vs not
the next graph, from page 17 of the pdf, shows that the pipeline ratios, or the average number of months it typically takes for a foreclosure to be completed, have been converging for judicial and non-judicial states….in this computation, which you see on the chart, LPS takes the total number of seriously delinquent and the in foreclosure process mortgages and divides it by the average number of completed foreclosures per month in each state over the previous six months to come up with the number of months of foreclosure backlog there is for that state (assuming all seriously delinquent mortgages proceed to that final stage)…with the slow pace of completed foreclosures nationwide, that pipeline has stretched out to well over 3 years nationwide; 54 months for judicial states and 39 months for non-judicial states…note that the mean foreclosure pipeline time was as high as 118 months – nearly 10 years - for judicial states during the foreclosure moratoriums imposed by the banks during the wake of the robosigning scandal…the national average number of days that a foreclosed property has remained in the foreclosure inventory is now up to 860 days as of this report, while the average seriously delinquent mortgage has remained seriously delinquent for 512 days without proceeding to foreclosure

June LPS pipeline ratio

finally, the next two graphics will break this all down by state....first, from page 22 of the pdf, we have the table of non-current mortgage and foreclosure percentages in all 50 states and the District of Columbia which we’ve featured in previous months...the first column shows the delinquency rate for each state, ie, the percentage of mortgages in each state that are at least one month behind and not yet in foreclosure, a category that’s jumped for each state this month...the second column is the percentage in each state that are in foreclosure, which has been falling consistently, by at least a point or more every month over the past year, and the third column is the total non-current percentage, or sum of all those behind of their mortgage, which rose from 9.13% nationally in May to 9.61 in June...note that the last column, which shows the year over year percentage change in non current mortgages in each state, is still falling for every state despite June's jump, although some states, like New York, Vermont and Wyoming, have barely seen any change in a year...

also note that judicial states, where banks must establish their right to foreclose in court, are marked on the table below by a red asterisk...these states have the highest percentages of mortgages still stranded in foreclosure, led by Florida, where LPS shows 9.5% of all mortgaged homes still in foreclosure, contrasted to the 10.6% in foreclosure the MBA showed ..other judicial states with a foreclosure inventory greater than 5% include New Jersey at 7.1%, New York at 5.8%, Hawaii at 5.7%, and Maine at 5.3%...non-judicial Mississippi has remained an outlier here years, with a low foreclosure rate despite the fact that 15.4% of their homeowners still remain non-current on their mortgages...

June LPS state delinquency table

lastly, the map graphic below, from page 18 of the pdf, shows the percentage improvement in "performance" of non-current mortgages that each state has made from worst of the mortgage crisis for each state....note that the scale runs from just 4.9% off the peak for the deep red state of New York, to a 65.7% "improvement" in dark green Arizona, where most seriously delinquent homeowners were quickly foreclosed on...you'll note that the non-current inventory remains near the delinquency peak in most of the Northeast, with only 5% more mortgages in Maine current now than at the worst of the crisis, and just an 8.7% improvement from the worst in New Jersey...

June LPS non-current off peak

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the key monthly economic release of the past week was on our International Trade in Goods and Services for June from the Dept of Commerce, which showed our June trade deficit was much smaller than expected and the lowest since October 2009, however, unlike the low deficits of 2009, which were brought on by recession reduced imports and the collapse of global trade overall, this month's low deficit largely resulted from the highest exports on record, leading to widespread expectations there'd be a positive correction on the order of 0.8% to 2nd quarter GDP to 2.5%...as we noted last week, net exports for the second quarter were reported as a -0.81 drag on GDP...

seasonally adjusted exports of $191.2 billion, $4.1 billion or 2.2% above those of May, and imports at $225.4 billion, $5.8 billion, or 2.5% less than May’s, resulted in a goods and services deficit of $34.2 billion, down 22.4% from the May deficit of $44.1 billion, which was originally reported at $45.0 billion...our adjusted deficit in goods decreased by $9.7 billion to $53.2 billion as exports of goods increased $4.0 billion to $134.3 billion and our imports of goods decreased $5.7 billion to $187.4 billion, while our trade surplus in services increased by $0.1 billion to $18.9 billion as our exports of services increased $0.1 billion to $56.9 billion and imports of services were statistically unchanged at $38.0 billion...on the same balance of trade basis, our unadjusted trade deficit in goods was at $50.6 billion, so the effect of the seasonal adjustment was to raise the aggregate goods deficit by $2.6 billion....

our FRED bar graph below shows the monthly change in millions of dollars in our total exports, imports, and trade balance for every month going back to January 2008 (click for larger version)..in each set of three bars, blue is the change in exports for the month, red is the change in imports, and brown is the change in the trade balance, with increases above the 0 line and decreases below it…that exports add to the change in the trade balance and imports subtract from it should be evident, as each brown bar is composed from the net change of the blue minus the net change of the red…

FRED Graph

commerce department reporting on exports and imports of goods are lumped into the very general end use categories of foods, feeds, and beverages, industrial supplies and materials, capital goods, automotive vehicles, parts, and engines, consumer goods, and "other" goods, which are then rounded to the nearest tenths of billions to reflect the imprecision of these monthly estimates; however, we can extract raw data for the larger components of those categories in millions from the full release with tables to give us a more precise clue as to what has been moving our trade balance (reference exhibit 7 for seasonally adjusted exports; exhibit 8 for imports)

the June increase in exports of goods included a $1.5 billion increase in exports of industrial supplies and materials to $43.3 billion, which included increases of $898 million in exports of fuel oil to $5,982 million, $575 million of other petroleum products to $4,694 million, $378 million more exports of organic chemicals to $3,070 million and $322 million more in monetary gold at $2,938 million; exports of capital goods also increased by $1.5 billion, to 46.2 billion, which included a increase of $428 million in civilian aircraft engines to $2,659 million, and an increase of $322 million in telecommunications equipment to $3,483 million, and an increase of $305 million in industrial engines to $2,626 million...exports of consumer goods also increased by $1.0 billion to $16.6 billion, including an increase of $673 million in jewelry to $1,494 million and an increase of $376 million in gem diamonds to $2,009 million, while exports of pharmaceuticals shrunk $317 million to $3,992 million...exports of foods feeds and beverages increased by $0.3 billion to $10.1 billion, led by a $160 million increase in wheat exports to $934 million and a $144 million increase in exports of meat and poultry to $1,640 million...meanwhile, exports of other goods increased $330 million to $5,368 million and exports of automotive vehicles, parts, and engines decreased by a seasonally adjusted $439 million to $12,621 million..

the decrease in imports from May to June included our imports of industrial supplies and materials declining $2.5 billion to $54.6 billion, including $1,028 million less imports of fuel oil, $1,025 million less imports of other petroleum products, and $339 million less imports of non monetary gold, which were down to $3,070 million, $3597 million, and $1026 million respectively...imports of crude oil, still our largest single item, were up $33 million to $21.993 billion, as oil averaged $96.93 a barrel in June, up a bit from $96.84 in May...we also imported a seasonally adjusted $43.7 billion of consumer goods in June, $1.6 billion less than in May, as our imports of cellphones and similar goods fell $1,485 million to $7,705 million, our imports of gem diamonds fell $546 million to $1,734 million while our imports of TVs and video equipment rose $214 million to $2,514 million...our June imports of foods, feeds, and beverages fell $0.4 billion to $9.5 billion as we imported $106 million less fruits and juices and $95 million less in cocoa beans with widespread declines in imports of other foodstuffs...in addition, imports of automotive vehicles, parts, and engines were up $0.3 billion to $25.7 billion and imports of other goods were up $1.2 billion, while imports of capital goods were statistically unchanged at $45.6 billion as increases of $300 million in imports of civilian aircraft engines and $116 million of materials handling equipment offset decreases of $176 million in imports of semiconductors, $140 million in computers and $111 million in computer accessories..

our bilateral deficits in goods trade, which are not seasonally adjusted, generally improved across the board; our goods deficit with China, which improved from $27.9 billion in May to $26.6 billion in June, still accounted for more than half of our $50.6 billion unadjusted goods deficit...other major bilateral trade deficits on an unadjusted basis in June include a $7.1 billion deficit with the European Union, down from $10.8 billion in May, a $5.8 billion deficit with OPEC, $5.5 billion with Japan, $4.9 billion with Germany, $4.8 billion with Mexico, $3.0 billion with Saudi Arabia, $1.6 billion with South Korea, $1.6 billion with Canada,  $1.4 billion with Ireland, $1.2 billion with Venezuela and $1.0 billion with India...small bilateral trade surpluses were recorded with Hong Kong at $3.4 billion, Australia at $1.7 billion, Brazil at $1.6 billion and Singapore at $1.2 billion....

(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…)