August 2009

Foreclosures in July 2009

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I think anyone reading this blog would not be surprised by the jump in foreclosures of 6.74% in one month. That's a whopping 32.32% increase in foreclosures nationwide since July 2008!

360,149 U.S. properties during the month, an increase of nearly 7 percent from the previous month and an increase of 32 percent from July 2008. The report also shows that one in every 355 U.S. housing units received a foreclosure filing in July

That is the 3rd time in the last 5 months for record increases.

We noted this projection of 3.2 million foreclosures by the end of this year.

Trade Deficit Increased in June 2009

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June 2009 trade statistics are out.

Total June exports of $125.8 billion and imports of $152.8 billion resulted in a goods and services deficit of $27.0 billion, up from $26.0 billion in May, revised. June exports were $2.4 billon more than May exports of $123.4 billion. June imports were $3.5 billion more than May imports of $149.3 billion.

Federal budget deficit: $1.27 Trillion so far this year

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At what point do the numbers get so large that they become meaningless? We may have hit that point.

The federal deficit climbed higher into record territory in July, hitting $1.27 trillion with two months remaining in the budget year.

The Treasury Department said Wednesday that the July deficit totaled $180.7 billion, slightly more than the $177.5 billion economists had expected.

The Obama administration is projecting that when the current budget year ends on Sept. 30, the imbalance will total $1.84 trillion, more than four times last year's record-high.
...
The July deficit reflected government spending of $332.2 billion, a record amount for any month and up from outlays of $263.3 billion in July 2008.

Home Sales & Prices - NAR Q2 2009 Survey

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The National Association of Realitors has released Q2 2009 home prices & sales survey results.

First the good news. Sales increased 3.8% from Q1 2009, although still down 2.9% from Q2 2008.

According to the report, each home sale creates $63k into the economy (let's verify this claim!)...

but oops, 36% of these sales were from distressed properties (i.e. foreclosed on homes). Stranger still, 30 yr. fixed mortgages dropped slightly in Q2, down 5.03% from 5.06%. Let's call that a flat line change from Q1 to Q2 2009.

Now for the bad news (or good news depending how you look at it). Median Home prices rose 4% from Q1 2009 to Q2 2009, but are still down 15.6% from Q2 2008.

More Auto Weirdness

Bob O has pointed out more on the auto employment weirdness to me. The mess that Greenspan made has some great writing on how the early shutdown of much of the auto industry due to the bankruptcies as GM and Chrysler is skewing the unemployment numbers.

Up until recently there was a very regular pattern to the late July shutdown in which a number of people would be laid off and then rehired. That didn't happen at the same time this year.

It's even clearer looking at the raw numbers.

The Tennessee Convict War

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In 1997 the Tennessee branch of the AFL-CIO made an agreement with the Corrections Corporation of America (CCA) to support the privatization of Tennessee's state prison system. This opened the door for Tennessee's prison labor being used to compete with private industry.
Currently the highest-paying prisoner in Tennessee earns 50 cents an hour to produce jeans for Kmart and JC Penney, among other things.

Of all the states, Tennessee unions should have been the last ones to support prison labor. The reason lies more than a century in the past, in the days following the end of slavery.

Derivatives, Remember Them? Obama's Legislative Proposal

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A legislative proposal for derivatives regulation has been release from the Obama administration. The actual bill is IMPROVEMENTS TO REGULATION OF
OVER-THE-COUNTER DERIVATIVES MARKETS(large pdf). Here is he U.S. Treasury overview of the bill in a press release.

First, what kills me is the Treasury calls OTC and CDSes financial innovation. I don't think mathematical fiction is a new science frankly. It's so strange to me that no one is looking to regulate these instruments themselves.

Ok, what's in the bill (or what is not in it)?

The Wall Street Journal:

Wholesale Inventories Dramatic Swoon, but Sales don't go along for the ride this time

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The Montly Wholesale Trade: Sales & Inventories, June 2009 was released today. Folks, while productivity shows very bad news for workers to obtain new jobs, wholesale inventories is also showing that production is not expecting an increase in demand. Wholesale inventories were slashed and burned for the 10th month in a row. (you might note Ritholtz is pointing out these numbers will revise Q2 2009 GDP down.)

Wholesale inventories are about 25% of the total business inventories.

That said, sales rose slightly, 0.4%, and looks like a potential trend on a two month increase (see graph below, although not adjusted for prices).

Productivity - Wage Gap Grows

Labor Department announced today that productivity of U.S. workers rose 6.4% in the second quarter of 2009. Productivity is measured by output per hours of workers. The largest increase since the third quarter of 2003.

Here is the kicker:

The huge increase was due to hours working declined faster than output.

Oh, wait there is more:

Hourly compensation in the nonfarm business sector increased 0.2 percent in the second quarter of 2009, compared to a decrease of 2.4 percent one quarter earlier. When the 1.3 percent rise in consumer prices was taken into account, real hourly compensation fell 1.1 percent in the second quarter of 2009 (seasonally adjusted annual rates).

So, wages are not even competing up with inflation.

We have the productivity-wage gap growing. We have hours worked falling. We have real hour compensation decling.

This all translate to more destruction of the middle class and more income inequality. Our economic growth model is broken, as Dr. Palley argues, and this report is just another example of that.

I am adding these quotes from this news story because, in my opinion, show the total disregard for the survival of the middle class:

"It's good because it helps keep inflation low; labor costs are pretty benign," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida.

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