February’s employment; January’s trade deficit, consumer credit and the LPS Mortgage Monitor

on the the face of it, the Employment Situation report for February from the BLS was better than what we’ve been seeing; payroll employment increased by a seasonal adjusted 236,000, and the unemployment rate fell to 7.7% from January’s 7.9%, the lowest headline rate in over 4 years..and while the 236,000 jobs added was not even up to the average 250K jobs added each month during the Clinton years, when we were already at full employment, it‘s the most added in a year save November, when the final job number was boosted to 247,000 by the massive adjustments in January…this month’s revisions were slightly negative overall; January’s payroll jobs increase was revised down to 119,000 from 157,000, while December’s jobs total was revised up to 219,000 from 196,000…lest we start to think that we’re making some kind of progress, included to the left below is Bill McBride’s chart comparing job losses from the previous employment peak for all post war recessions; you can see that job losses were more than twice as bad as any recessions other that 1948 and 1957, and that the duration is already over twice as long as all but the 2001 recession, & there’s still more than 2% less jobs – 3,200,000 in fact – than there were 61 months ago, even though the population has increased by 13,000,000 over that span

Percent Job Losses During Recessionsaccording to the jobs data gleaned by the establishment survey, private sector job gains were pretty much across the board; only the government sector continued to shed workers, employing 10,000 less than januarysectors showing the most job gains were professional and business services, which added 73,000 jobs, 44,000 of which were in administrative and support services, including services to buildings, and 11,000 of which were in accounting and bookkeeping…employment in construction also increased by 48,000, with most of the growth in specialty trades, split nearly evenly between residential and non-residential; unlike last year, that doesnt seem to be an aberration caused by unusually warm weather…the health care sector also gained 32,000 jobs, split between 14,000 in ambulatory health care services, 9.000 in residential care facilities, and 9000 in hospitals…other sectors with decent gains included retail trade with 24,000 new jobs, and information processing with 20,000average earnings for all private payroll employees rose by 4 cents to $23.82, while average earnings non supervisory employees rose 5 cents…there was a rebound in hours worked as well; the average workweek for all employees on private nonfarm payrolls was up 0.1 hour to 34.5 hours, while the manufacturing workweek rose 0.2 hours to 40.9 hours…factory overtime also increased by 0.1 hour to 3.4 hours…but even though the averages may be up, most middle class jobs that could support a household are not being replaced; the chart below is from a slide presentation by the San Francisco Fed which shows that the lion’s share of jobs lost during the recession have been middle income jobs paying $13.84 to $21.13 an hour, while the majority of new jobs created during this recovery have been low paying jobs from $7.69 to $13.83; mid-wage jobs have made up just 27% of new jobs since 2008

job losses gains

  FRED Graph the jobs data gathered by the February Household survey was not as encouraging as the headline decline in the unemployment rate would lead you to believe, and it includes some details that lead us question the apparent positive results from the establishment survey…with the caveat that the seasonally adjusted numbers posted in this series are extrapolated from questionnaires of just 60,000 households and have a margin of error on the order of ±400,000, we’ll first take a look at how that lower unemployment rate was arrived at…the number of those who reported they were employed rose by 170,000, while the number of those reported as unemployed declined by an even greater 300,000, indicating a net 130,000 people stopped looking for work over the month, and thus weren’t counted….this meant a 130,000 decline in those in the labor force to 155,524,000, off of which unemployment rates are calculated…the lower number of unemployed (12,032,000) is 7.7% of that, our lowest calculated unemployment rate since Obama took office; however, due to the accompanying decline in the labor force, the labor force participation rate actually fell by 0.1% to 65.6%, a scant 0.1% from the recent low, seen in red on our chart…and with the working age population of those not in jail or the army increasing by 165,000; the employed to population barely budged, and was statistically unchanged at 58.6%, graphed in blue…combined with the increase in population, the total number of us considered “not in the labor force” increased by 269,000 in February….other data in the household survey revealed more disturbing trends; the number of the long-term unemployed, those of us out of work for 27 weeks or longer, rose to 4.797 million from 4.708 million and now account for 40.2% of those counted as unemployed; the number of part time jobs rose 459,000, and 444,000 of those working at them didn’t even indicate they were looking for full time work; thus the alternate unemployment rate, U-6, also dropped from 14.4% to 14.3%…part of the reason for that may be that there were 340,000 more of us reporting that we were working more than one job to make ends meetMIsh attributes the loss of full time jobs to the obamacare mandate, wherein employees who work 30 hours or more must be covered by their employers, and there has been acedotal evidence some of this is taking place

another important release of the past week was on our International Trade in Goods and Services for January from the Dept of Commerce; we saw how a surprising lower trade deficit improved our 4th quarter GDP, but we’re off to a bad start in the new year with a major reversal as our goods and services trade deficit hit a seasonally adjusted $44.4 billion in January, up 16.5% from the adjusted deficit of $38.1 billion in December; January’s exports of $184.5 billion were $2.2 billion less than December exports of $186.6 billion, while January’s imports of $228.9 billion were $4.1 billion more than December imports of $224.8 billion; roughly two thirds of the increase in the January deficit was due to an increase in oil imports, despite the fact that the US recently became the world’s top oil producer, surpassing Saudi Arabia, and despite the fact that oil averaged $94.08 per barrel in January, down 1.1% from $95.16 in Decemberchanges contributing to our decrease in goods exports included a $2.6 billion decrease in industrial supplies and materials, of which the major contributor was a decline in fuel oil exports of $1.721 billion, and a $1.0 billion decrease in so called “other goods”; which was partial offset by increases in exports of $0.678 billion of capital goods, $0.362 billion of foods, feeds and beverages (all of which was accounted for by a $371 million increase in soybean exports), $0.267 billion of consumer goods, and $0.175 billion of autos, parts, and engines…changes contributing to our increase in imports included  an increase in industrial supplies and materials: to the tune of $4,040 billion, of which $2.956 billion was the aforementioned oil, -$0.875 billion of consumer goods, $0.659 billion of autos, parts and engines, and $0.690 billion of other imports…all these totals are seasonally adjusted and further itemization of exports and imports are on pages 12-15 of the full release and tables (pdf)…our largest bilateral trade deficits were with $27.8 billion with China, $8.6 billion with the European Union, $6.4 billion with OPEC, $6.1 billion with Japan, $4.9 billion with Canada, $4.2 billion with Germany, and $3.6 billion with Mexico $3.6…small surpluses were recorded with Hong Kong at $2.7 billion, Australia at $1.2 billion, Brazil at $0.9 billion, and Singapore at $0.7 billion…these country totals are not seasonally adjusted, so they wont necessarily add up to the match the other data in this report…since China has already reported a 22% percent increase in its February exports and a 15% decrease in imports, it’s fair to project that our February deficit is likely to be even larger…we have again included Bill McBride’s chart showing the overall trade deficit in blue, the petroleum deficit in black, and the trade deficit without oil in red…if you click to enlarge it, you’ll see that January’s deficit in oil (negative from the chart top) has erased all the improvement of the last half of last year…

 U.S. Trade Deficit

another monthly report that we’ve been following is the Fed’s G19 Release, Consumer Credit for January…this month’s results reverted back to the pattern that caught our attention originally, wherein most of the monthly increase in credit in the economy was in the form of student loans from the Federal government..in January, aggregate consumer credit rose $16.15 billion to $2,795.3 billion, increasing at an annual rate of 7% from December’s $2,779.2 billion; revolving credit, or credit cards and the like, was nearly unchanged, rising from $850.8 billion to $850.9 billion yet still below the $851.8 billion of the second quarter 2012 and barely above the $847.3 billion at year end 2011, while non-revolving credit, which is long term loans for such as cars, yachts, and education but not real estate, rose from $1,928.4 billion in december to $1,944.4 billion in January which was a 10% annual rate of increase…again, what we want to see is how much of that is loans issued by the federal government, and since this report doesn’t include real estate, all of those loans would be for education…checking the 3rd table in the release, under the heading “Consumer Credit Outstanding”, which is not seasonally adjusted, we go to the subheading “Major types of credit, by holder” and see that non-revolving credit held by the federal government rose from $526.8 billion in December to $552.7 billion in January, a one month increase of $25.9 billion…that means in January, student debt was increasing at an annual rate of 73%, with the only caveat being seasonal factors that may alter any annualized computation…the adjacent bar graph is from Zero Hedge, who calls this month’s student loan increase “the fifth highest US government consumer credit injection in history” illustrates the monthly change in revolving credit in blue and non revolving credit in red, with the black line tracking the aggregate monthly change…

another report we have to look at is the Mortgage Monitor for January from LPS (Lender Processing Services) (pdf); which showed that 1,703,000 home loans, or 3.41% of all mortgages, were in the foreclosure process at the end of January, an additional 1,531,000 mortgages were 90 or more days delinquent, but not in foreclosure, and 1,974,000 more homeowners were more than 30 and less than 90 days past due, which gives us a total of ​​5,208,000 loans delinquent or in foreclosure in January…this means 10.44% of homeowners were at least one house-payment late in January, which was down from 11.90% in January of last year…as is typical for January, the delinquency rate fell to 7.03%, down from 7.17% in December, as homeowners who fall behind on house-payments during the holidays typically get current in the first 3 months of the year…the news briefing accompanying the Mortgage Monitor release made special note of the increasing length of time those who have been foreclosed on remain in their homes before their homes are seized; expressed as the number of months that it would take a given state to foreclose on all homeowners more than 90 days delinquent at the current rate that foreclosures are being processed, this is known as the “pipeline ratio” for that state; while some of this delay is due to large work backlogs at the banks and their own reluctance to own a significantly larger amount of homes than they already do, the complaint voiced by LPS VP Herb Blecher is about homeowners rights laws passed by Nevada, Massachusetts, and California, previously states where banks did not have to go court to seize a home….by imposing penalties on fraudulent documents and other unfair bank practices, these states have seen their foreclosure rates drop 75% or more…as a result, the pipeline ratios in these formerly non-judicial states is approaching that of some  judicial states, which require that the banks prove they have the right to foreclose in court before they change the locks and seize the homes…this can be seen in chart to the left below, taken from page 7 of the mortgage monitor (pdf), which shows pipeline ratios for selected states (red are non judicial states, blue are judicial)…if you click on it to enlarge, you’ll see that the pipeline ratio for Massachusetts, which was at 75 months in June of 2012, has now risen to 171 months, and the pipeline ratio for Nevada, which was 27 month in Jan 2012, has now risen to 57 months…this means that at the rate foreclosures are proceeding in Nevada, it would take 4 years and 9 months to clear the backlog, and at the rate they’re proceeding in Massachusetts, it would take over 14 years to clear the backlog…on the judicial side, two states stand out with particularly long pipelines; the pipeline ratio in New Jersey is 483 months, which means it would take over 40 years to finish the foreclosure process on all homes in the process at the current rate, while the pipeline ratio in New York is 607 months, which means at the current rate that foreclosures are moving through the courts, it would take over 50 years to complete all of them…because of long pipeline ratios, 5.69% of all mortgages in judicial states remain mired in foreclosure; contrast that with 1.79% of mortgages in non-judicial states; 58% of all mortgages in foreclosure in judicial state have been in limbo for more than 2 years, while foreclosure inventory in judicial states is 3 times that of non-judicial states (see page 5, pdf)
Delinquency Rate

LPS pipeline

we’ll include a few more panels from the Mortgage Monitor while we’re here…above on the right, we have a graph from page 4 of the pdf showing that both foreclosure starts and home seizures, which had been going down, moved up in January…148,000 foreclosure proceedings were started in January, up 8.3% from December, while 66,000 foreclosures were completed in January, up 14.7% over december…note that “foreclosure sales” does not mean that the bank sold the house; it’s a peculiar nomenclature that mortgage services use to indicate a foreclosed house has finally been seized…and below we have a table from page 23 of the pdf which shows the percentage of mortgages delinquent but not in foreclosure, the percentage in foreclosure, the total percent of non-current mortgages, and the year over year change in non-current mortgages for each state…judicial states are marked with a red asterisk; their problem mortgage rate has declined 7.0% since last year, while non-judicial states have seen an 11.8% decline…

LPS january state table

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

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