The Lehmann Letter (SM)
Today's New York Times carries a front-page article on the Obama administration's latest effort to provide relief for struggling homeowners:
http://www.nytimes.com/2010/03/27/business/27modify.html?hp
Direct your attention to the following sentence in the article's second paragraph:
"Additionally, the government will encourage lenders to write down the value of loans held by borrowers in modification programs to make their mortgages more affordable."
Mortgage write-downs have been the missing element in the government’s mortgage relief efforts. Thus far assistance has been directed toward interest-rate modification. But interest-rate modification won't help homeowners who face unemployment or whose loans are underwater. If you have a $400,000 mortgage on a home whose value has fallen to $300,000, an interest-rate reduction is insufficient. Only a write-down of the principal's value will provide real relief.
Let's hope this new program's bite is as big as its bark.
© 2010 Michael B. Lehmann
Friday, March 26, 2010
Wednesday, March 24, 2010
Recent Signs
The Lehmann Letter (SM)
Today the Census Bureau released February capital-goods and new-home sales data:
http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf
http://www.census.gov/const/newressales.pdf
New orders for nondefense capital goods appeared strong, rising from $55.000 billion in December to $57.402 billion in January and $60.376 billion in February. It appears that we are on a rebound when these numbers are plugged in to the chart below.
But they are deceptive because they include highly volatile new orders for aircraft. With these removed the data are $55.212 billion in December, $53.652 billion in January and $53.051 billion in February. What had been an upward trend is now flat or slightly downward.
Nondefense Capital Goods
(Click on chart to enlarge.)
Recessions shaded
New-home sales were also disappointing at 308,000 in February. The chart reveals that we are now in a double dip.
New Home Sales
(Click on chart to enlarge.)
Recessions shaded
Yesterday the National Association of Realtors reported 5.02 million existing-home sales in February:
http://www.realtor.org/press_room/news_releases/2010/03/ehs_ease
The chart obviously shows a double dip here, too.
Existing Home Sales
(Click on chart to enlarge.)
Recessions shaded
We have enjoyed some positive signs lately, but by no means are we out of the woods.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
Today the Census Bureau released February capital-goods and new-home sales data:
http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf
http://www.census.gov/const/newressales.pdf
New orders for nondefense capital goods appeared strong, rising from $55.000 billion in December to $57.402 billion in January and $60.376 billion in February. It appears that we are on a rebound when these numbers are plugged in to the chart below.
But they are deceptive because they include highly volatile new orders for aircraft. With these removed the data are $55.212 billion in December, $53.652 billion in January and $53.051 billion in February. What had been an upward trend is now flat or slightly downward.
Nondefense Capital Goods
(Click on chart to enlarge.)
Recessions shaded
New-home sales were also disappointing at 308,000 in February. The chart reveals that we are now in a double dip.
New Home Sales
(Click on chart to enlarge.)
Recessions shaded
Yesterday the National Association of Realtors reported 5.02 million existing-home sales in February:
http://www.realtor.org/press_room/news_releases/2010/03/ehs_ease
The chart obviously shows a double dip here, too.
Existing Home Sales
(Click on chart to enlarge.)
Recessions shaded
We have enjoyed some positive signs lately, but by no means are we out of the woods.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
Tuesday, March 16, 2010
Thursday, March 11, 2010
Real Estate
The Lehmann Letter (SM)
Washington continues its attempts to prop up real estate and residential construction. Yet the federal government still has not squarely confronted the enormity of the real-estate crisis. Foreclosures are high and, by some accounts, rising. An estimated quarter of all homes are underwater (mortgage debt exceeds home value).
Last month two reports illustrated the situation's fragility. January's new home sales fell to 309,000 and existing home sales shrank to 5.05 million. Homes are not selling well despite low interest rates and subsidized sales.
New Home Sales
(Click on chart to enlarge.)
Recessions shaded
Existing Home Sales
(Click on chart to enlarge.)
Recessions shaded
Plug the latest data into the charts and you can see that sales were stronger at the end of last year than at the beginning of this year. Building can't revive if homes don't move. And homes won't move as long as the specter of foreclosure hangs over the market.
It's not that nothing is being done. It's just that not enough is being done. Foreclosures won't stop if homeowners can't meet their mortgages or have lost the incentive to do so.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
Washington continues its attempts to prop up real estate and residential construction. Yet the federal government still has not squarely confronted the enormity of the real-estate crisis. Foreclosures are high and, by some accounts, rising. An estimated quarter of all homes are underwater (mortgage debt exceeds home value).
Last month two reports illustrated the situation's fragility. January's new home sales fell to 309,000 and existing home sales shrank to 5.05 million. Homes are not selling well despite low interest rates and subsidized sales.
New Home Sales
(Click on chart to enlarge.)
Recessions shaded
Existing Home Sales
(Click on chart to enlarge.)
Recessions shaded
Plug the latest data into the charts and you can see that sales were stronger at the end of last year than at the beginning of this year. Building can't revive if homes don't move. And homes won't move as long as the specter of foreclosure hangs over the market.
It's not that nothing is being done. It's just that not enough is being done. Foreclosures won't stop if homeowners can't meet their mortgages or have lost the incentive to do so.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
Monday, March 8, 2010
Another Hopeful Sign
The Lehmann Letter (SM)
On Friday the Federal Reserve released its latest data on consumer credit:
http://www.federalreserve.gov/releases/g19/Current/
These are loans made to households to finance the purchase of automobiles and other consumer durables. It does not include mortgage borrowing.
As you can see from the chart below, during the recent reces
sion consumer credit plunged to its worst low since World War II. Households stopped borrowing and begin repaying their debts at a record pace. Household priorities switched from making expenditures to repairing balance sheets.
We might ordinarily think of this as a good sign, but keep in mind that household borrowing finances household spending. Borrowing's collapse is a symptom of spending's collapse. It's another sign of the recent recession's severity.
Consumer Credit
(Click on chart to enlarge.)
Recessions shaded
But January's report (the latest month for which data is available) is a sign of hope. Consumer credit increased by $60 billion at a seasonally adjusted annual rate. Although, if you update the chart in your mind's eye, this is a relatively small increase, it is certainly an improvement over the $100 billion reductions that were the recent norm.
This report is only a single month’s data and is far from the $100 billion to $150 billion increases that were the norm for the previous decade. You can see how variable the data are, so we could slip into negative territory with next month's report. Nonetheless the latest news was good news, and let's hope there is more of it.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
On Friday the Federal Reserve released its latest data on consumer credit:
http://www.federalreserve.gov/releases/g19/Current/
These are loans made to households to finance the purchase of automobiles and other consumer durables. It does not include mortgage borrowing.
As you can see from the chart below, during the recent reces
sion consumer credit plunged to its worst low since World War II. Households stopped borrowing and begin repaying their debts at a record pace. Household priorities switched from making expenditures to repairing balance sheets.
We might ordinarily think of this as a good sign, but keep in mind that household borrowing finances household spending. Borrowing's collapse is a symptom of spending's collapse. It's another sign of the recent recession's severity.
Consumer Credit
(Click on chart to enlarge.)
Recessions shaded
But January's report (the latest month for which data is available) is a sign of hope. Consumer credit increased by $60 billion at a seasonally adjusted annual rate. Although, if you update the chart in your mind's eye, this is a relatively small increase, it is certainly an improvement over the $100 billion reductions that were the recent norm.
This report is only a single month’s data and is far from the $100 billion to $150 billion increases that were the norm for the previous decade. You can see how variable the data are, so we could slip into negative territory with next month's report. Nonetheless the latest news was good news, and let's hope there is more of it.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
Friday, March 5, 2010
Employment
The Lehmann Letter (SM)
Take a look at today's employment numbers from the Bureau of Labor Statistics:
http://stats.bls.gov/news.release/empsit.b.htm
The top line informs us that the economy lost 36,000 jobs in February. We continue to hope for job gains, but this is much better news than February of last year when the economy shed 726,000 jobs.
The chart below shows that we’ll be in positive territory before long if the present trend continues.
Job Growth
(Click on chart to enlarge.)
Recessions shaded
The table reveals other bits of good news. The sixth row continues to show that manufacturing has stopped losing jobs. The service sector (tenth line) has also added jobs for two months in a row. Temporary help (17th row) has had a dramatic turnaround, improving by 47,000 jobs. This is a strong gain and may indicate that full-time employment growth will soon occur.
Let's hope so.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
Take a look at today's employment numbers from the Bureau of Labor Statistics:
http://stats.bls.gov/news.release/empsit.b.htm
The top line informs us that the economy lost 36,000 jobs in February. We continue to hope for job gains, but this is much better news than February of last year when the economy shed 726,000 jobs.
The chart below shows that we’ll be in positive territory before long if the present trend continues.
Job Growth
(Click on chart to enlarge.)
Recessions shaded
The table reveals other bits of good news. The sixth row continues to show that manufacturing has stopped losing jobs. The service sector (tenth line) has also added jobs for two months in a row. Temporary help (17th row) has had a dramatic turnaround, improving by 47,000 jobs. This is a strong gain and may indicate that full-time employment growth will soon occur.
Let's hope so.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
Wednesday, March 3, 2010
Beige Book
The Lehmann Letter (SM)
Today the Fed released its Beige Book report on economic conditions:
http://www.federalreserve.gov/fomc/beigebook/2010/20100303/default.htm .
Here is the lead paragraph:
“Reports from the twelve Federal Reserve Districts indicated that economic conditions continued to expand since the last report, although severe snowstorms in early February held back activity in several Districts. Nine Districts reported that economic activity improved, but in most cases the increases were modest. Overall conditions were described as mixed in the Atlanta and St. Louis Districts, though St. Louis noted further signs of improvement in some areas. Richmond reported that economic activity slackened or remained soft across most sectors, due importantly to especially severe February weather in that region.”
That's a good report.
For a guarded assessment of the future, take a look at David Leonhardt's article in today's New York Times business section:
http://www.nytimes.com/2010/03/03/business/economy/03leonhardt.html?ref=business
Mr. Leonhardt points to some key troublespots. The boost the economy derived from the inventory recovery is coming to an end. The benefits from the bank bailout and stimulus package will soon peak. Troubles remain in residential real estate. None of this bodes well for employment, which will probably remain weak for quite some time.
We may not be headed for a double dip, but let's hope that forecast is not just a matter of definition.
© 2010 Michael B. Lehmann
Today the Fed released its Beige Book report on economic conditions:
http://www.federalreserve.gov/fomc/beigebook/2010/20100303/default.htm .
Here is the lead paragraph:
“Reports from the twelve Federal Reserve Districts indicated that economic conditions continued to expand since the last report, although severe snowstorms in early February held back activity in several Districts. Nine Districts reported that economic activity improved, but in most cases the increases were modest. Overall conditions were described as mixed in the Atlanta and St. Louis Districts, though St. Louis noted further signs of improvement in some areas. Richmond reported that economic activity slackened or remained soft across most sectors, due importantly to especially severe February weather in that region.”
That's a good report.
For a guarded assessment of the future, take a look at David Leonhardt's article in today's New York Times business section:
http://www.nytimes.com/2010/03/03/business/economy/03leonhardt.html?ref=business
Mr. Leonhardt points to some key troublespots. The boost the economy derived from the inventory recovery is coming to an end. The benefits from the bank bailout and stimulus package will soon peak. Troubles remain in residential real estate. None of this bodes well for employment, which will probably remain weak for quite some time.
We may not be headed for a double dip, but let's hope that forecast is not just a matter of definition.
© 2010 Michael B. Lehmann
March Publication Schedule
The Lehmann Letter (SM)
Here’s the publication schedule for some of March 2010’s most important economic indicators.
Go to http://www.beyourowneconomist.com/ and click on Seminars, then click on Economic Indicators to navigate the sites that provide the data and click on Charts for a visual presentation that you can update.
PUBLICATION SCHEDULE
March 2010
Source (* below)…………Series Description…………Day & Date
Quarterly Data
BLS………………Productivity…………… Thu, 4th
BEA………………Int’l Transacs……… Thu, 18th
BEA…………………………GDP…………………………Fri, 26th
Monthly Data
ISM…Purchasing managers’ index………Mon, 1st
BLS…………………………Employment………………Fri, 5th
Fed………Consumer credit…(Approximate).Fri, 5th
Census……………Balance of trade……………… Thu, 11th
Census…………………Retail trade……………………Fri, 12th
Census…………………Inventories……………………Fri, 12th
Fed………………Industrial production………Mon, 15th
Fed………………Capacity utilization…………Mon, 15th
Census……………Housing starts………………Tue, 16th
BLS………………Producer prices………………Wed, 17th
BLS………………………Consumer prices……………Thu, 18th
Conf Bd…………Leading indicators………Thu, 18th
NAR……………………Existing-home sales……Tue, 23rd
Census…………………New-home sales…………Wed, 24th
Census………………Capital goods………………Wed, 24th
Conf Bd……………Consumer confidence…Tue, 30th
* BEA = Bureau of Economic Analysis of the U.S. Department of Commerce
* BLS = Bureau of Labor Statistics of the U.S. Department of Labor
* Census = U.S. Bureau of the Census
* Conf Bd = Conference Board
* Fed = Federal Reserve System
* ISM = Institute for Supply Management
* NAR = National Association of Realtors
© 2010 Michael B. Lehmann
Here’s the publication schedule for some of March 2010’s most important economic indicators.
Go to http://www.beyourowneconomist.com/ and click on Seminars, then click on Economic Indicators to navigate the sites that provide the data and click on Charts for a visual presentation that you can update.
PUBLICATION SCHEDULE
March 2010
Source (* below)…………Series Description…………Day & Date
Quarterly Data
BLS………………Productivity…………… Thu, 4th
BEA………………Int’l Transacs……… Thu, 18th
BEA…………………………GDP…………………………Fri, 26th
Monthly Data
ISM…Purchasing managers’ index………Mon, 1st
BLS…………………………Employment………………Fri, 5th
Fed………Consumer credit…(Approximate).Fri, 5th
Census……………Balance of trade……………… Thu, 11th
Census…………………Retail trade……………………Fri, 12th
Census…………………Inventories……………………Fri, 12th
Fed………………Industrial production………Mon, 15th
Fed………………Capacity utilization…………Mon, 15th
Census……………Housing starts………………Tue, 16th
BLS………………Producer prices………………Wed, 17th
BLS………………………Consumer prices……………Thu, 18th
Conf Bd…………Leading indicators………Thu, 18th
NAR……………………Existing-home sales……Tue, 23rd
Census…………………New-home sales…………Wed, 24th
Census………………Capital goods………………Wed, 24th
Conf Bd……………Consumer confidence…Tue, 30th
* BEA = Bureau of Economic Analysis of the U.S. Department of Commerce
* BLS = Bureau of Labor Statistics of the U.S. Department of Labor
* Census = U.S. Bureau of the Census
* Conf Bd = Conference Board
* Fed = Federal Reserve System
* ISM = Institute for Supply Management
* NAR = National Association of Realtors
© 2010 Michael B. Lehmann
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