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U.S. Economy: Payrolls Unexpectedly Decline for Second Month

Friday, March 7th, 2008

U.S. Economy: Payrolls Unexpectedly Decline for Second Month
By Shobhana Chandra

March 7 (Bloomberg) — The U.S. unexpectedly lost jobs in February for the second consecutive month, adding to evidence the economy is in a recession.

Payrolls fell by 63,000, the most in five years, after a revised decline of 22,000 in January, the Labor Department said today in Washington. The jobless rate dropped to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work.

“All the lights are flashing red,” said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts, in an interview with Bloomberg Television. “We’re in a recession. I don’t think there is any doubt about it at this point.”

Treasury notes soared after the report on concern that the weakening labor market, combined with lower home prices, higher fuel bills and a global credit squeeze, will force consumers to further reduce spending. Minutes before the figures were released, the Federal Reserve said it will expand two short-term auctions this month to $100 billion in an effort to address a deepening credit crisis.

Traders now anticipate Fed Chairman Ben S. Bernanke and his team will cut the benchmark interest rate by at least three quarters of a percentage point at or before their March 18 meeting.

“We now think the economy can be described as having entered a recession in early 2008,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. In a note last week, he wrote that some of the forces that signal the start of a recession “have not taken hold.”

Worse Than Anticipated

Economists had projected payrolls would rise by 23,000 following a previously reported 17,000 drop in January, according to the median of 76 forecasts in a Bloomberg News survey.

Service industries, which include banks, insurance companies, restaurants and retailers, added 26,000 workers last month. Retail payrolls fell by 34,100, the biggest drop in more than five years.

Payrolls at builders fell 39,000, the eighth consecutive month of cutbacks. Homebuilders are trimming staff as the biggest housing slump in a quarter century deepens. To make matters worse, commercial construction projects are now also on the decline, indicating firings at non-residential builders are likely to increase.

“This is going to be a weak quarter,” Edward Lazear, chairman of the White House Council of Economic Advisers, said in a Bloomberg Television interview from Washington. He said the Bush administration expects “close to a zero quarter” in terms of gross domestic product growth. “I wouldn’t say negative, that’s still up for grabs,” he said.

Housing Meltdown

The real estate recession and meltdown in financial markets have led to growing dismissals at banks, mortgage and management companies.

Still, investors would be mistaken to assume the Fed will continue to cut rates as deeply as it has already this year, Dallas Fed President Richard Fisher said in an interview with Bloomberg Television in Paris today.

“I would discourage you from thinking that simply because of a significant action in the credit markets, like we had yesterday, that suddenly we’re going to have an Open Market Committee meeting, and that suddenly we’re going to move fed funds rates in response,” Fisher said. “It doesn’t work that way.”

Manufacturing Downturn

Manufacturing payrolls dropped by 52,000, the biggest decline since July 2003, after falling 31,000 a month earlier. Economists had forecast a drop of 25,000.

Government payrolls increased by 38,000. That means the total decline in private payrolls for the month was 101,000, the biggest drop since March 2003.

The average work week was unchanged at 33.7 hours. The average factory work week and overtime hours were unchanged. Average weekly earnings rose $1.68 to $599.86.

Workers’ average hourly wages rose 5 cents, or 0.3 percent, to $17.80, in line with forecasts. Hourly earnings were up 3.7 percent from February 2007. Economists surveyed by Bloomberg had forecast a 3.6 percent gain for the 12-month period.

Americans, whose spending accounts for more than two-thirds of the economy, are less upbeat about finding work, a Conference Board report showed last week. The share of consumers who said jobs are plentiful fell and the proportion who said jobs are hard to get jumped, pushing consumer confidence down to a five- year low in February.

Bernanke Outlook

“The economic situation has become distinctly less favorable,” Bernanke said in testimony to Congress last week.

The Fed chairman referred to “downside” risks for the economy four times, including “the possibilities that the housing market or the labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further.”

The central bank’s regional economic survey this week said “the hiring pace slowed in various sectors and labor markets loosened somewhat in many districts,” as economic growth cooled in eight of 12 regions since the start of 2008.

Adecco SA, the world’s biggest temporary-employment company, said this week that fourth-quarter profit declined as hiring slowed in the U.S. The Swiss company also said it may miss its long-term goal of sales growth of 7 percent to 9 percent.

“We’ve been seeing a weak U.S. market for more than a year now,” Chief Executive Officer Dieter Scheiff said in a March 4 interview.

To contact the reporter on this story: Shobhana Chandra in Washington

Last Updated: March 7, 2008 10:30 EST


U.S. Mortgage Foreclosures Rise as Owners `Give Up’ (Update3)

Thursday, March 6th, 2008

By Kathleen M. Howley

March 6 (Bloomberg) — U.S. mortgage foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased, the Mortgage Bankers Association said today.

New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier. Late payments rose to a 23-year high, the organization said in a report today.

“We’re seeing people give up even before they get to the reset because they couldn’t afford the home in the first place,” said Jay Brinkmann, vice president of research and economics for the Washington-based trade group.

The Bush administration is urging lenders to avert foreclosures by modifying mortgage terms amid the worst housing slump in a quarter century. The Federal Reserve has slashed its benchmark interest rate twice this year to try to avert the first recession since 2001. The central bank yesterday said the net worth of U.S. households decreased by $532.9 billion during the fourth quarter as home values fell.

The share of all home loans with payments more than 30 days late, both prime and fixed-rate loans, rose to a seasonally adjusted 5.82 percent, the highest since 1985, the bankers’ group said in today’s report.

Buyers `Overstretched’

About 40 percent of all foreclosures are homeowners with prime or subprime loans who couldn’t make their payments before the reset, Brinkmann estimated in an interview. Another 23 percent are borrowers who received some form of loan modification, typically a freezing or a reduction of their rate, and then default, he said

Forty-two percent of new foreclosures in the fourth quarter were people with adjustable-rate subprime mortgages, given to borrowers with limited or tainted credit records, according to the report. Those types of loans accounted for about 7 percent of all mortgages, the report said.

“It comes down to an overstretching of buyers to get into homes they couldn’t afford and an overextending of credit by lenders who were more willing to take risk,” Brinkmann said.

Another 20 percent of new foreclosures were prime adjustable-rate mortgages, which accounted for 15 percent of all home loans, according to the report.

Late Payments Data

Twenty percent of adjustable-rate subprime loans had late payments in the fourth quarter, a number that excludes the one of every eight mortgages already in foreclosure, the bankers group said in their report.

The share of late payments for adjustable prime loans was 5.51 percent, from 3.39 percent a year earlier, and the foreclosure inventory rose to 2.59 percent, almost tripling from a year earlier.

The Mortgage Bankers survey examines 46 million residential home loans, about 80 percent of the market. The study gives percentages without providing the number of loans they represent.

Homebuilding executives, economists and securities analysts predict the housing market won’t begin to recover until at least 2009. U.S. sales of new and existing homes probably will fall to 5 million this year, a drop of 33 percent from the all-time high of 7.46 million in 2005, before rising to 5.23 million in 2009, Freddie Mac said in a March 3 forecast.

Freddie Mac and Fannie Mae, the biggest U.S. mortgage finance companies, have posted their largest-ever losses as rising defaults boosted credit costs. Fannie Mae had a $3.55 billion loss in the fourth quarter, the Washington-based company said Feb. 27. Freddie Mac reported $2.45 billion fourth-quarter loss the following day.

The Mortgage Bankers survey came on the same day that the National Association of Realtors reported that the number of Americans signing contracts to buy previously owned homes was unchanged in January.

The Realtors’ index of signed purchase agreements held at 85.9, higher than forecast and the second-lowest level since the Chicago-based group began keeping records in 2001.

Florida, California push foreclosure starts

Thursday, March 6th, 2008

Florida and California make up a disproportionate part of foreclosure starts in the U.S. and helped push the national number to new highs, the Mortgage Bankers Association said.

California and Florida together represent 21 percent of all loans outstanding, but accounted for 30 percent of foreclosure starts in the country, the report said. They also accounted for 39 percent of all prime adjustable-rate mortgages outstanding and 47 percent of prime ARM foreclosure starts.

Together, the make up 29 percent of all subprime ARMs and 36 percent of subprime ARM foreclosure starts.

In Florida, the percentage of loans on which a foreclosure was started during the quarter rose to 1.46 percent from 1.09 percent in the third quarter. The percentage of loans in the foreclosure process at the end of the quarter climbed to 3.22 percent from 2.19 percent.

The delinquency rate for mortgage loans on one- to four-unit residential properties, which does not include loans in the process of foreclosures, for the state was up to 7.47 percent, up from 6.47 percent in the third quarter.

The delinquency rate for prime loans increased to 4.57 percent from 3.9 percent. Subprime loans had a much higher delinquency rate, up to 19.76 percent from 17.2 percent.

Nationally, the delinquency rate was 5.82 percent, up from 5.79 percent in the third quarter.

The percentage of loans on which a foreclosure was started increased to .83 of a percent from .78 of a percent, and the percentage of loans in the foreclosure process at the end of the quarter was 2.04 percent, up from 1.69 percent.


Seattle home prices up a tad in Q4, says report

Tuesday, February 26th, 2008

Across the country, Americans saw home prices drop precipitously in the fourth quarter, but in Seattle, that wasn’t the case.

Seattle was one of only three U.S. markets where home prices increased in the latest quarter, according to data released by Standard & Poor’s. Only Charlotte, N.C.; Portland, Ore.; and Seattle showed year-over-year increases in prices. Seattle’s growth was the slightest, at .5 of a percent, followed by Portland, at 1.2 percent, and Charlotte, at 2.3 percent.

South Florida home prices plunged. Home prices in the Miami metropolitan area dropped 17.5 percent in the fourth quarter of 2007, the biggest decline in the country, according to Standard & Poor’s.

Las Vegas and Phoenix were right behind, with a 15.3 percent year-over-year decline. Los Angeles, San Diego, San Francisco, Detroit and Washington, D.C., all posted declines in the double digits.

Nationwide, home prices had fallen 8.9 percent by Dec. 31, ending a full year of declining prices.

The S&P/Case-Shiller quarterly index tracks the prices of existing single-family homes nationwide compared to a year earlier.

“We reached a somber year-end for the housing market in 2007,” said economist Robert Shiller, a creator of the report. “Home prices across the nation and in most metro areas are significantly lower than where they were a year ago. Wherever you look, things look bleak, with 17 of the 20 metro areas reporting annual declines and the remaining three reporting flat or moderate growth rates.”