HI-TRANSFER

The latest release of the Fannie Mae Monthly Summary indicated that total serious single family delinquency went flat in November while remaining at distressed levels.

In November, 3.13% of non-credit enhanced loans went seriously delinquent while the level was 9.32% of credit enhanced loans resulting in an overall total single family delinquency of 4%.

The following charts (click for larger ultra-dynamic and surf-able chart) show what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.

It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers.

The Federal Reserve Bank of Kansas City, like other district FRBs (New York, Philadelphia, Richmond and Dallas), tracks its region’s manufacturing activity by surveying a number of important indicators such as general activity, production, shipments, orders, employment and prices for raw materials and finished products.

The latest results are indicating that the manufacturing activity fell to a contraction level of -4 in December with virtually every component measure turning negative while prices paid for raw materials increased notably to 28.

It's important to note that although this data-set has a history that only runs as far back as mid-2001, the composite index never fell below 10 during the "recovery" that followed the tech-wreck of the early aughts.

Today, we see the composite index not only remaining depressed but actually turning notably negative, clearly indicating the internal weakness of our current economic expansion and possibly presenting a strong signal of recession to come.

The following chart plots the seasonally adjusted Composite index since 2001 with the solid red line indicating the threshold between expansion and contraction.

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is continuing to rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak (which looks like a minor blip by comparison) set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that in September, an additional 430,434 recipients were added to the food stamps program increasing 7.82% on a year-over-year basis while household participation increased 9.81%.

Individual participation as a ratio of the overall civilian non-institutional population has increased 7.04% over the same period.

Participation continues to increase with nominal benefit costs climbing a lofty 9.08% on a year-over-year basis to $6.26 billion for the month.

The Commercial Paper (CP) market is essentially a private debt market used by corporations as a generally cheaper means of funding typical recurring operations than drawing on a line of bank credit.

Commercial paper, as financial instrument, is by no means a recent innovation and, in fact, you can read about how the CP market was affected by the many historic financial shocks experienced by the U.S. (read Panic on Wall Street: A History of America’s Financial Disasters)

Although the Federal Reserve was able to artificially bring CP rates down significantly since the shocking 615 basis point spread blowout (A2/P2 spread) of late 2008, they had not been successful in preventing an overall contraction in the CP market.

The Federal Reserve calculates and published the total amount of CP outstanding every week and for November commercial paper generally trended up breaking its recent decent while still contracting at a rate of 2.00% on a year-over-year basis to $1002.10 billion, a level that is still notably lower than even the worst periods of the last two recessions.

Today’s Employment Situation Report indicated that in November, net nonfarm payrolls increased with private nonfarm payrolls adding 140,000 jobs and the unemployment rate declining to 8.6% over the same period.

Net private sector jobs increased 0.13% since last month climbing 1.74% above the level seen a year ago but but remained a whopping 5.09% below the peak level of employment seen in December 2007.

Today’s employment situation report showed that in November the full time unemployment rate declined to 9.2% of the civilian workforce but remains near the highest rate seen in 41 years.

The Bureau of Labor Statistics considers full time workers to be those “who have expressed a desire to work full time (35 hours or more per week) or are on layoff from full-time jobs”.

Full time jobless workers currently account for roughly 88.5% of all unemployed workers.

Be sure to bookmark the "Scary Unemployment Dashboard"... it's live.

Today's employment situation report showed that conditions for the long term unemployed were mixed in November and remained epically distressed by historic standards.

Workers unemployed 27 weeks or more declined to 5.691 million or 43% of all unemployed workers while the median number of weeks unemployed increased to 21.6 weeks and the average stay on unemployment increased to 40.9 weeks, the highest level ever recorded.

Looking at the charts below (click for super interactive versions) you can see that today’s sorry situation far exceeds even the conditions seen during the double-dip recessionary period of the early 1980s, long considered by economists to be the worst period of unemployment since the Great Depression.

As I demonstrated in prior posts, given their strong correlation, the home price indices provided daily by Radar Logic, averaged monthly, can effectively be used as a preview of the monthly S&P/Case-Shiller home price indices.

The current Radar Logic 25 MSA Composite data reported on residential real estate transactions (condos, multi and single family homes) that settled as late as September 26 and averaged for the month indicates that with the slowing summer/fall transactions has come a notable decline of prices (the typical trend) with the national index declining 1.43% since August and falling 4.80% below the level seen in September 2010.

The Radar Logic index will likely be capturing an decline in prices from now until early 2012 as transactions continue to trend down.

Look for tomorrow's S&P/Case-Shiller home price report to reflect this declining trend though to a lesser degree due to its three month rolling-average nature with prices moderately higher.

Today, the Federal Reserve Bank of Dallas released their latest read on manufacturing in their region indicating that manufacturing activity improved slightly but remained weak with the current general business activity index increasing to a weak expansion level of 3.2 while the future general business activity index declined to 9.7.

These results are coming, more or less, inline with the other regional manufacturing survey all indicating that business activity has slowed sharply in 2011 and may possibly indicate recession is upon us.

Today's final release of the Reuters/University of Michigan Survey of Consumers for November indicated improvement in consumer sentiment with a reading of 64.1 but falling 10.47% below the level seen last year while one year inflation expectations went flat at 3.2%.

The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) rose to 55.4, and the Current Economic Conditions Index climbed to 77.6.

It's important to recognize that consumer sentiment has seriously eroded over the past few months with the current results remaining near levels not seen since 1980, a major indication that consumers are in the process of tightening even further on spending.

The latest release of the Bureau of Labor Statistics (BLS) Mass Layoff Report indicated a decline in large-scale layoffs with 1353 mass layoff events for October resulting in 118,689 initial unemployment claimants on a seasonally adjusted basis.

The BLS considers a mass layoff event to be a condition where there are at least fifty initial claims for unemployment insurance originating from a single employer over a period of five consecutive weeks.

Today, the Federal Reserve Bank of Richmond released their Survey of Manufacturing Activity for November showing that the composite index, the broadest measure of manufacturing activity, improved 6 points to a weak level of 0.

The most notable component measures also showed similar results with the new orders improving to -2, shipments increasing to 1 and backlog of orders climbing to a weak -10.

The following chart plots the composite index with the red line marking a level of 0, or the threshold between increasing and declining activity.

Today, the Bureau of Economic Analysis (BEA) released their second "estimate" of the Q3 2011 GDP report showing that the economy continued to expand at a notably slower pace than originally estimated with real GDP increasing at an annualized rate of just 2.0% from Q2 2011.

On a year-over-year basis real GDP increased 1.51% while the quarter-to-quarter non-annualized percent change was 0.50%.

The latest quarterly results indicate that the most notable source of weakness in the economy came from the change in private inventories component resulting in an overall 0.9% decline to gross private domestic investment and government expenditures with non-defense spending declining 3.8% while state and local spending declined declined by 1.4%.

Fixed investment purportedly made notable contributions to Q3 GDP with non-residential fixed investment increasing 14.8% from Q2 2011 while residential fixed investment increased 1.6% over the same period.  
Personal consumption expenditures also increased notably increasing 2.3% from Q2 2011.

Keep in mind that these results are likely very poorly estimated and are sure to be revised notably in following quarters and even years to come.

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for October showing an increase in sales with total home sales climbing 1.4% since September and 13.5% above the level seen in October 2010.

Single family home sales increased 1.6% from September and rose 13.8% above the level seen in October 2010 while the median selling price declined 5.8% below the level seen in October 2010.

Inventory of single family homes declined 0.5% from September dropping 12.2% below the level seen in October 2010 which, combined with the relatively slow pace of sales, resulted in an still elevated monthly supply of 7.8 months.

The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply since 2005.

Today, the University of Hong Kong released their Hong Kong Residential Real Estate Series (HKU-REIS) indicating that, in September, the price of residential properties declined a whopping 2.62% since August but still climbed 15.15% above the level seen in September 2010.

It appears that after a stunning run of monthly increases that saw prices increase dramatically, prices are beginning to show a notable pullback with all measures declining on the month.

The HKU-REIS is a set of property price indices constructed monthly using a “modified” repeat-sale methodology similar to that of the S&P/Case-Shiller indices yet suited to the Hong Kong property market.

The Empire State Manufacturing Survey consists of a series of diffusion indices distilled from a monthly survey of New York regional manufacturing executives and seeks to identify trends across 22 different current and future manufacturing related activities.

Today’s report showed an improvement for both current and future assessments of manufacturing activity with the current activity index climbing to a weak 0.61 while future activity jumped to just 39.02.

Current prices paid declined to 18.29 while current new orders weakened to -2.07 and assessments of future new orders improved to 35.37.

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a 0.5% increase from September and an increase 7.2% on a year-over-year basis on an aggregate of all items including food, fuel and healthcare services.

Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales increased 0.86% from September and increased 3.79% above the level seen in October 2010 while, adjusting for inflation, “real” discretionary retail sales increased 0.12% over the same period.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

Note... be sure to bookmark the OECD Dashboard for a real-time view of all the OECD composite indices.

The Organization for Economic Co-Operation and Development (OECD) publishes a wealth of data tracking the fundamental economic dynamics of the world’s largest economies.

The OECD leading indicator, industrial production, business confidence and consumer confidence series all disclose important and timely clues to the state of each respective economy or group of economies.

The latest monthly results indicate that economic conditions in the global economy have weakened notably with the total leading index declining 0.17% since August dropping 0.55% below the level seen in September 2010 while two more timely indicators of business and consumer confidence slumped dramatically.

Total Business confidence plunged 0.59% since September (more timely data) falling 2.42% below the level seen in October 2010.

Total Consumer confidence dropped 0.31% since September (more timely data) slumping 2.57% below the level seen in October 2010.