the key economic release this past week was the March report on our trade deficit, which despite improvement over February, showed that the BEA’s estimate of 1st quarter GDP was overly optimistic and will have to be revised down, indicating the economy actually shrank during the first three months of this year.…other reports this week included the April ISM Report On Non-Manufacturing Business, which reported that their composite non-manufacturing index (NMI) rose 2.1% to 55.2% in April, indicating that more service industry purchasing managers reported expansion in their businesses than did in March; the 1st Quarter report on Labor Productivity and Costs from the Bureau of Labor Statistics, which reported that non-farm labor productivity decreased at a 1.7% annual rate in the quarter, the greatest slowdown in a year, while unit labor costs rose by 4.2%, the most since the 4th quarter of 2012; the Fed’s March G-19 on Consumer Credit, which showed total consumer credit increased at a seasonally adjusted annual rate of 6.7% for the month, with revolving credit growing at a 1.6% annual rate, and non-revolving credit, such as car and student loans, growing at a 8.7% rate; the Wholesale Trade Sales and Inventories report for March (pdf) from the Census Bureau, which estimated that seasonally adjusted sales of merchant wholesalers increased by 1.4 percent (+/-0.5) from the revised February level and 6.5 percent (+/-1.6%) from a year ago, while March wholesale inventories were 1.1 percent (+/-0.4%) higher than the revised February level and 5.9 percent (+/-0.9%) higher than March a year ago; and the Job Openings and Labor Turnover Survey for March from the BLS, which indicated there were a seasonally adjusted 4,014,000 jobs open at the end of March, down a bit from the 4,125,000 job openings reported at the end of February…we also saw the release of the Mortgage Monitor for March, the graphics report on mortgage conditions formerly from LPS, which we’ll take a look at later in the this commentary..

March Trade Deficit Falls by $1.5 Billion, Less Than Expected

the March report on our International Trade in Goods and Services from the Commerce Department indicated that our seasonally adjusted trade deficit in goods and services was at $40.4 billion in March, down from a revised $41.9 billion in February, as our exports rose $3.9 billion to $190.0 billion on a $3.7 billion increase to $135.1 billion in goods exports and a $0.2 billion increase to $58.8 billion in services exports, while our imports rose $2.5 billion to $231.8 billion on a $3.1 billion increase to $195.8 billion in goods imports and a $0.7 billion reduction of imports of services to $38.4 billion, as we were no longer paying for rights to the Olympic Games…since last March, our trade deficit has risen by $3.8 billion on a $9.2 billion or 5.0% increase in exports and a $13.0 billion, or 5.9 percent increase in imports…you’ll recall that we noted in our coverage of 1st quarter GDP last week that the BEA assumed an increase in exports and a decrease in imports in March, and hence the large increase in imports implies a downward revision to GDP; since GDP was reported nearly flat, the combination of this report and other revisions previously noted has led to estimates that our economy actually shrank by as much as 0.8% in the first quarter…  

the screenshot of our FRED bar graph below shows the monthly change in exports in blue and the monthly change in imports in red since January 2012, with the net of them resulting in the change in the monthly balance of trade, which is shown in brown…each group of three bars represents one month’s of trade data, with positive changes above the ‘0’ line and negative changes below it; note that when exports (blue) increase in a given month, they add to the trade balance change in brown; and when exports decrease, they subtract from the brown change in the trade balance, while the action of imports on the balance is just the reverse, ie, when imports increase in a given month, they subtract from the brown trade balance for the month, but when imports decrease, the balance of trade rises as a result…in March, both exports and imports increased, but exports increased more, so the trade balance improved by the difference…the interactive version of this bar graph at FRED loads with 20 years of trade data, which you can view monthly by moving your cursor across the graph, or use the sliders across the bottom of the graph to adjust the time period viewed…

March 2014 trade balance

end use categories of exports that saw seasonally adjusted February to March increases included capital goods, exports of which rose by $2,114 million to $45,859 million on a $1,261 increase in exports of civilian aircraft, a $273 million increase in exports of aircraft engines, and a $236 million increase in exports of generators…exports of industrial supplies and materials rose $888 million to $41,865 million on $419 million greater exports of fuel oil and a $354 million increase in natural gas exports, and exports of automotive vehicles, parts, and engines rose $579 million to $12,796 million…in addition, our exports of other goods not categorized by end use rose $266 million to $5,126 million, and our exports of foods, feeds, and beverages increased by $97 million to $12,098 million on $278 million higher exports of corn, $103 million greater dairy exports, and $103 more exports of animal feeds while our exports of soybeans fell by $499 million…..meanwhile, our exports of consumer goods fell by $304 million to $16,348 million in March on a $365 million decrease in exports of pharmaceuticals and a $168 million decrease in exports of cell phones and similar household goods while our exports of toiletries and cosmetics rose by $93 million…

end use categories of imports that saw seasonally adjusted increases for the month were led by consumer goods, of which we imported goods valued at $45,439 million in March, $1,157 million more than February, on a $1,076 million increase in imports of cellphones and similar goods, $276 million more pharmaceutical imports, and $251 million more gem diamonds, while our footwear imports decreased by $223 million…we also imported $10,622 million in foods, feeds, and beverages in March, $1,032 million more than February, on $203 more fish and shellfish imports, with every food category seeing an increase in imports except fruits and juices, which saw an $11 million decline…we also imported $47,399 million in capital goods, $850 million more than in February, with a $431 million increase in imports of semiconductors, a $391 million increase in civilian aircraft imports, and increases in most other capital goods imports except computers, imports of which fell by $669 million….in addition, imports of other goods not categorized by end use rose by $820 million to $6,675 million and imports of automotive vehicles, parts, and engines were up by $20 million to $25,811 million…meanwhile, imports of industrial supplies and materials were down by $481 million to $57,318 million on a $2,135 million drop in imports of crude oil, while imports of fuel oil rose by $448 million and imports of other petroleum products rose by $756 million…

Job Openings Fall 111,000 in March

as we mentioned in opening, the Job Openings and Labor Turnover Survey for March showed that seasonally adjusted job openings fell by 111,000 from the February six year high to 4,014,000 jobs left unfilled at the end of March…as a result, the number of unemployed per job opening rose to 2.6 from February’s 2.5…job openings as a percentage of the employed labor force fell to 2.8% from 2.9%, with the 819,000 openings in professional and business services, which could be anything from managers to janitors, accounting for the largest of number in any sector, while openings in retail trade fell from 477,000 in February to 454,000 in March and construction job openings fell from 127,000 to 104,000..

the same release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘others’, which include retirements and death…in March, seasonally adjusted new hires totaled 4,625,000, which was down 74,000 from the 4,699,000 hired or rehired in February, while the hiring rate as a percentage of all employed was unchanged at 3.4%, but up from 3.2% a year earlier…seasonally adjusted hiring increases were strongest in health care and social assistance, where hiring rose by 30,000 workers to 478,000, while hiring in retail fell by 31,000 to 691,000….total separations were also down a bit, from 4,459,000 in February to 4,431,000 in March, while the separations rate as a percentage of total employment was unchanged at 3.2%…thus hires minus separations would work out to an increase of 194,000 payroll jobs, 9,000 less than the revised March total of 203,000 jobs reported in last week’s April jobs report

breaking down the seasonally adjusted job separations, we find 2,476,000 quit their jobs in March, virtually unchanged from the number who quit in February, as the quits rate, an indication of worker confidence, also remained unchanged at 1.8% of total employment…quitting rose slightly in several sectors, while those who quit jobs in accommodation and food services fell by 31,000 in February to 460,000 in March….another 1,574,000 were either laid off, fired or otherwise discharged in March, down from 1,596,000 in February, while the discharges rate fell to 1.1% of all those employed from 1.2% in February…meanwhile, other separations, which includes retirement and death, were at 381,000 in March, down from 388,000 in February, for an ‘other separations’ rate of 0.3%…. 

our FRED graph for this report below shows job openings in blue in thousands monthly since January 2006, and monthly hires in orange and monthly separations in violet over the same span…note that when separations in purple were above orange hires we were losing jobs…also, of the two major components of separations, the count of layoffs and firings is tracked in red, while the number of those quitting their jobs monthly is shown in green….all the monthly data included in the graph below can be viewed with the interactive version of it at the FRED website..

March 2014 JOLTS


March Mortgage Monitor Shows Foreclosure Starts, Mortgage Delinquencies, and New Mortgages All at New Lows

the March Mortgage Monitor (pdf) from Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division) revealed that a number of new monthly mortgage benchmarks were set; the number of new foreclosures in March fell to the lowest since late 2006; the number of homes remaining in the foreclosure process fell to the lowest since October 2008; the number of homeowners who were delinquent on their mortgage payments fell to the lowest level since October 2007, and the number of new mortgage originations were at all time low for the 14 years of LPS records…according to BKFS, 88,113 new foreclosures were started in March, down from 91,993 in February and well below the 121,012 foreclosures that were started in March a year ago…roughly 1,070,000 home loans, or 2.13% of all mortgages, were in the foreclosure process in March, that is, they had received at least the first legal notice of foreclosure but their homes had not yet been seized; that was down from 1,115,000 who were in foreclosure in February and 1,689,000, or 3.38% of all active mortgages in foreclosure a year ago…another 2,770,000 home owners, or 5.52% of all homes with a mortgage, were at least one payment late on their mortgage in March but not in foreclosure; of those, 1,199,000 mortgages were ‘seriously delinquent’ or more than 90 days delinquent but not in foreclosure…combining those seriously delinquent with those homeowners who were in foreclosure, we find that 4.52% of all homeowners remained in serious trouble at the end of the month, down from 4.70% in February and down from 6.34% in March 2013…

the first graph below, from page 5 of the Mortgage Monitor (pdf) shows the percentage of mortgages that were either in foreclosure or delinquent monthly since the beginning of 2005…the dark orange shading represents the history of those mortgages that were in foreclosure monthly, which peaked at 4.29% of all mortgages in October 2011 and has trended down since, to the March level at 2.13%, as indicated by the small print on the graph…the light orange shading adds those mortgages that were at least 30 days delinquent to the total each month, to yield the top line which represents the total non-current mortgages monthly; the peak for that metric occurred in January 2010, as also marked in small print on the graph, at which time over 3.8% of mortgages were in foreclosure and another 10.57% of mortgages were delinquent but not in foreclosure, meaning more than 1 in 7 homeowners were not paying on their mortgages at that time….this contrasts to what BKFS indicates as normal percentages of non-current home loans in December of 2005, when just 0.5% of homes were being foreclosed on, while another 4.3% were delinquent but not in foreclosure…in the inset box on the graph, BKFS also shows the last dates that both foreclosures and those delinquent but not in foreclosure were lower than March’s percentages; foreclosures, at 2.07% in October 2008, and delinquent mortgages, at 5.37% in October 2007, when the housing bust was just getting underway…

March 2014 LPS delinquencies and foreclosures

the next graphic, from page 8 of the Mortgage Monitor pdf, is a map showing the percentage of mortgages that are not current on their payments in each state, with the states with the highest percentage of non-current mortgages shown in the darkest reds and those with the least percentage of non-current mortgages shown in darkening shades of green…as you see below, there is a wide difference between those states with the most troubled mortgages and those with the least, running from highs of 13.4% non current mortgages in Mississippi and 12.9% non-current in New Jersey to a low of just 2.5% who are non-current in North Dakota..

March 2014 LPS non current

in the following table we have a further breakdown of non-current mortgages by state, taken from page 29 of the pdf…listed for each state and the District of Columbia are the percentage of home loans that were delinquent (Del%) in March, the percentage of mortgages that are in foreclosure (FC%), the total mortgages that weren’t current with their payments (NonCurr%) and the year over year change in the number of non-current mortgages…note that states that have a judicial foreclosure process, where the bank must prove their right to foreclose on a homeowner in court, are marked by a red asterisk, as the industry has a long history of focusing on this factor as a reason that foreclosures have been delayed so long….notice that all the states that still have more than 4% of their mortgaged homes in foreclosure are all judicial states; led by New Jersey with 6.5%,  Florida with 6.0%, New York with 5.1%, Hawaii with 4.8%, and Maine with 4.3%…also note that Mississippi, with 13.4% of their mortgages delinquent, is an outlier here, and it has long been a state with one of the highest mortgage delinquency rates in the country, as even in January 2005, before the mortgage crisis began, Mississippi’s mortgage delinquency rate was already at 11.3% (see 2005 map, p 7)

March 2014 LPS non current state table

another focus of this month’s Mortgage Monitor was the record low number of new mortgages taken out during the month…the graph below, from page 17 of the pdf, shows the number of new mortgage originations monthly since January 2003 tracked with a red line…also shown, with a black line, are the monthly interest rates for 30 year fixed mortgages over the same span… although BKFS does not give the exact count, it’s clear from the chart that new mortgages have fallen from as high as 2,300,000 before the crisis to below 250,000 as of March…note that though the headline says they’re at the lowest level in ten years, they are in fact at the lowest in the 14 years LPS has tracked this metric

March 2014 LPS origninations

also highlighted over pages 24 to 26 in this month’s Mortgage Monitor is the question of mortgage affordability, which they define as a ratio of the average monthly payment on a 30 year fixed rate mortgage to the average household income, with average home prices determined by their own home price index, which most recently showed a 7.6% year over year home price increase nationally….the map below shows the percentage of their income the average home buyer would have to commit to mortgage payments in each of the lower 48 states, with the darkest green indicating states with the most affordable homes, while homes in the states shaded the darkest red are the most expensive…again, there’s quite a range, from cheaper homes in Michigan, where the average home price requires 13% of the average household income in monthly payments, to California and New York, where the average home price necessitates average mortgage mortgage payments at 33% of average income…

March 2014 LPS 4 payment to income ratio

finally, for an overview of how the mortgage crisis has played out from the beginning, we’ll also include, from page 30 of the pdf, the Mortgage Monitor table showing the monthly count of active home mortgage loans, the number of mortgages delinquent by 30, 60 and by more than 90 days, the monthly count of those mortgages in the foreclosure process, the number of foreclosure starts, and the average days delinquent for those who are in the “foreclosure pipeline”, going back to January 2008 with monthly data since January 2013…after the columns for the date and the active loan count for that month, the the next three columns show the total loan counts of delinquent mortgages by number of days delinquent, the number of mortgages in foreclosure (FC) and the foreclosure starts for each month listed…in the last two columns, we see the average length of time those who’ve been more than 90 days delinquent have remained in that status, and then the average number of days those in foreclosure have been stuck in that process because of the long pipelines…we can see that for those 90 days delinquent, the length of time remaining in that status without foreclosure has risen again to 496 days as new foreclosure starts have stalled, while the length of time for those who’ve been in foreclosure without a resolution has lengthened to a record average 966 days…with that average approaching 3 years, it’s almost certain that a significant percentage of homeowners in judicial states with large backlogs have been in foreclosure for over 5 years..

March 2014 LPS loan count buckets

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)



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