An alternate "more adverse" scenario

So far, the unemployment rate has been higher than the "more adverse" scenario used in the stress test. Calculated Risk has an updated chart using just two month's of data:

The "more adverse" scenario seems to be a plausible forecast for the economy.  In fact, the Unemployment rate looks like it will reach 10.3% this year which is the "more adverse" scenario for the average unemployment rate for 2010.    Per the Federal Reserve, "the likelihood that the average unemployment rate in 2010 could be at least as high as in the alternative more adverse scenario is roughly 10 percent."  If the "more adverse" scenario is the new baseline forecast, then I wonder how the banks would fare in a worse case scenario. 

Seeking Alpha has a great spreadsheet that let's you plug in different unemployment rate forecasts and loss rate assumptions.  In the Stress Test, the economists had forecast that the average unemployment rate for 2010 would be 8.8% with a 10% chance of being 1.5% higher at 10.3%.  In spreadsheet to the right, I am using an unemployment rate of 11.8% as the more adverse scenario (if you change the baseline forecast to 10.3%, then it seemed logical that there would be a 10% chance that the unemployment rate would reach 11.8%).

There is a big disparity between the healthy banks and the banks that would be stressed under a more adverse scenario than the Fed used. 

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US Debt Clock

Take a deep breathe before clicking on the picture.

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Job losses at the county level

Slate.com has an amazing graphic showing the job losses month by month, county by county. Just as recently as June 2008 (as the map on the right shows), there was year over year job growth.  Job losses really started accelerating in November 2008.  April 2009 figures at the county level are not out yet, but we already know from the national data that the year over year job losses will be over 5.5 million.

Click here for the article and to view the map.

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Unemployment Rate rises to 8.9%

According to "The Employment Situation" for April 2009, released today by the U.S. Department of Labor, seasonally adjusted, the unemployment rate was 8.9%, up from 8.5% in March and 5.0% a year ago. The unemployment rate is now up 3.5 percentage points in the last twelve months and is up 4.1 percentage points from its recent low of 4.4%. Nonfarm payrolls decreased by 539,000 in April down from a revised 699,000 in March.  This month they revised the previous two months of March and February downward by 66,000 jobs. Last month, the total jobs lost from December 2007 to March 2009 was reported to be 5,133,000. This month, with the revisions, the total jobs lost from December 2007 to April 2009 has reached 5,738,000 jobs. The average recession since World War II has had a loss of 1,917,000 job.  The biggest loss before this recession came in 1982 with 2,838,000 jobs lost. In terms of job loss, we are in the biggest recession since the Great Depression.

The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance yesterday. Initial claims were at 601,000 for the week ending May 2. This is down from the previous week's number of 635,000. The four week average of initial claims, which is not as volatile, was at 623,500. This is down from the previous week's figure of 638,250. Continued claims for unemployment insurance increased to 6,351,000 for the week ending April 25th up from the previous week's number of 6,295,000. The four week average for continued claims was also up to 6,207,000 from 6,082,000. This is the highest continued claims has ever been. The previous high was in 1982. Initial claims is faster to move up and signals increases in the unemployment rate. Continued claims take longer to go down than the initial claims once the unemployment rate is elevated. The Unemployment rate doesn't drop until continued claims start to come down.

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Unemployment Rate at 8.1%; Jobs lost reach 4.38 million

The U.S. Government is putting the largest 19 banks in the U.S. under a stress test to assess how much capital they may need to survive this recession.  They have 2 scenarios:  one, a baseline scenario, based on consensus forecasts and a second "more adverse" scenario.  The baseline forecast has GDP declining by 2.0% in 2009 and rising by 2.1% in 2010 and has the Unemployment Rate reaching 8.4% in 2009 and 8.8% in 2010.  The more adverse scenario has GPD declining by 3.3% in 2009 and rising by 0.5% in 2010 and has the Unemployment Rate at 8.9% in 2009 and 10.3% in 2010.

So far GDP and the Unemployment Rate are far worse than their "more adverse" scenario.  GDP for 4th Quarter 2008 was at -6.2%.  According to "The Employment Situation" for February 2009, released today by the U.S. Department of Labor, seasonally adjusted, the Unemployment Rate for February hit 8.1% and without seasonal adjustments it was 8.9%.  At the current pace, the unemployment rate would hit 10.3% by August 2009.  Since 1948, the unemployment rate has never risen by more than .5% in a 12 month span without entering into a recession. The unemployment rate is now up 3.3 percentage points in the last twelve months and is up 3.7 percentage points from its recent low of 4.4%.

Nonfarm payrolls decreased by 651,000 in February, 655,000 in January and 681,000 in December. This month they revised the previous two months of January and December downward by 265,000 jobs.  In January they revised downward the amount of jobs lost in the previous two months by 66,000 jobs. In December they made a downward revision of 154,000. In November, they made a downward revision of 199,000.  Last month, the total jobs lost from December 2007 to January 2009 was reported to be 3,572,000 jobs.  This month, with the revisions, the total jobs lost from December 2007 to February 2009 has reached 4,384,000 jobs. The average recession since World War II has had a loss of 1,917,000 jobs on average. The biggest loss before this recession came in 1982 with 2,838,000 jobs lost. In terms of job loss, we are in the biggest recession since the Great Depression. And the end is not in sight yet.

The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance yesterday. Initial claims were at 639,000 for the week ending February 28th. This is down from the previous week's number of 670,000. The four week average of initial claims, which is not as volatile, was at 641,750. This is up from the previous week's figure of 639,750.

Continued claims for unemployment insurance increased to 5,106,000 for the week ending February 21st down from the previous week's number of 5,120,000. The four week average for continued claims was also up to 5,011,000 from 4,934,000. This is the highest continued claims has ever been. The previous high was in 1982. Initial claims is faster to move up and signals increases in the unemployment rate. Continued claims take longer to go down than the initial claims once the unemployment rate is elevated. The Unemployment rate doesn't drop until continued claims start to come down.

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Unemployment rate continues to rise; will hit 8.5% in 2009

Some economists are predicting that the unemployment rate will hit 8.5% in 2009. Today, we already hit 8.5% unemployment rate when not seasonally adjusted, up from 7.1% in December and 5.4% a year ago. January is typically the highest month for the unemployment rate. According to "The Employment Situation" for January 2009, released today by the U.S. Department of Labor, seasonally adjusted, the unemployment rate was 7.6%, up from 7.2% in December and 4.9% a year ago. Since 1948, the unemployment rate has never risen by more than .5% in a 12 month span without entering into a recession. The unemployment rate is now up 2.7 percentage points in the last twelve months and is up 3.2 percentage points from its recent low of 4.4%.

Nonfarm payrolls decreased by 598,000 in January, 577,000 in December, and 597,000 in November. This month they revised the previous two months of December and November downward by 66,000 jobs. In December they revised downward the amount of jobs lost in the previous two months by 154,000. In November, they made a downward revision of 199,000. They also made huge revisions for last year and revised as far back to 2004. Last month, the total jobs lost from December 2007 to December 2008 was reported to be 2,589,000. This month, with the revisions, the total jobs lost from December 2007 to January 2009 has reached 3,572,000 jobs. The average recession since World War II has had a loss of 1,917,000 jobs on average. The biggest loss before this recession came in 1982 with 2,838,000 jobs lost. In terms of job loss, we are in the biggest recession since the Great Depression. And the end is not in sight yet.

The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance yesterday. Initial claims were at 626,000 for the week ending January 31st. This is up from the previous week's number of 591,000. The four week average of initial claims, which is not as volatile, was at 582,250. This is up from the previous week's figure of 543,250. Continued claims for unemployment insurance increased to 4,788,000 for the week ending January 24th up from the previous week's number of 4,768,000. The four week average for continued claims was also up to 4,672,000 from 4,628,000. This is the highest continued claims has ever been. The previous high was in 1982. Initial claims is faster to move up and signals increases in the unemployment rate. Continued claims take longer to go down than the initial claims once the unemployment rate is elevated. The Unemployment rate doesn't drop until continued claims start to come down.

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The unemployment rate spikes to 7.2%

The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance yesterday. Initial claims were at 467,000 for the week ending January 3rd. This is down from the previous week's number of 491,000. The four week average of initial claims, which is not as volatile, was at 525,000. This is down from the recent total of 558,000 reached a couple of weeks ago. 

Continued claims for unemployment insurance increased to 4,611,000 for the week ending December 27th up from the previous week's number of 4,510,000. The four week average for continued claims was also up to 4,470,000 from 4,425,000. This is the highest it has been since December 1982.

Initial claims is faster to move up and signals increases in the unemployment rate. Continued claims take longer to go down than the initial claims once the unemployment rate is elevated. The Unemployment rate doesn't drop until continued claims start to come down.

Unemployment is on the rise. According to "The Employment Situation" for December 2008, released today by the U.S. Department of Labor, the unemployment rate was at 7.2% in December compared to an upwardly revised rate of 6.8% in November. Since 1948, the unemployment rate has never risen by more than .5% in a 12 month span without entering into a recession. The unemployment rate is now up 2.4% in the last twelve months and is up 2.8% from its recent low of 4.4%.

Nonfarm payrolls decreased by 524,000 in December, 584,000 in November, 423,000 in October, and by 403,000 in September.  Last month they revised downward the amount of jobs lost in the previous two months by 199,000. This month, they made a downward revision of 154,000. If you add the payrolls lost in December to the revisions for November and October, jobs were worse off by 678,000 more than was previously reported. This is a significant amount of jobs lost. The average recession since World War II has had a loss of 1,917,000 jobs on average. The biggest loss came in 1982 with 2,838,000 jobs lost. Nonfarm payrolls have declined for 12 straight months with a net loss of 2,589,000. It looks like next month, this recession will develop into the biggest recession in terms of jobs lost since the Great Depression.

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Unemployment Rate Rises; Most Jobs Lost in Month Since 1974

The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance yesterday. Initial claims were at 509,000 for the week ending November 29th. This is down from the previous week's number of 530,000.  The four week average of initial claims, which is not as volatile, was at 524,500.  This is the highest initial claims has been since 1982 surpassing the recessions of 1991 and 2001. 

Continued claims for unemployment insurance increased to 4,087,000 for the week ending November 22nd up from the previous week's number of 3,998,000. The four week average for continued claims was also up to 4,001,750 from 3,938,000. This is the highest it has been since January 1983. 

Initial claims is faster to move up and signals increases in the unemployment rate. Continued claims take longer to go down than the initial claims once the unemployment rate is elevated. The Unemployment rate doesn't drop until continued claims start to come down.

Unemployment is on the rise. According to "The Employment Situation" for November 2008 released today by the U.S. Department of Labor, the unemployment rate was at 6.7% in November compared to 6.5% in October.  Since 1948, the unemployment rate has never risen by more than .5% in a 12 month span without entering into a recession. The unemployment rate is now up 2.0% in the last twelve months and is up 2.3% from its recent low of 4.4%.

Nonfarm payrolls decreased by 533,000 in November, 320,000 in October, and by 403,000 in September. This was the most amount of jobs lost in one month since 1974.  Last month they revised downward the amount of jobs lost in the previous two months by 179,000.  This month, they made a downward revision of 199,000.  If you add the payrolls lost in November to the revisions for October and September, jobs were worse off by 732,000 more than was previously reported.  This is a significant amount of jobs lost.  The average recession since World War II has had a loss of 1,917,000 jobs on average.  The biggest loss came in 1982 with 2,838,000 jobs lost.  Nonfarm payrolls have declined for 11 straight months with a net loss of 1,911,000. This recession looks like it will develop into the biggest recession in terms of jobs lost since the Great Depression.  

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The unemployment rate spikes to 6.5%; over 1 million jobs lost so far this year

The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance yesterday. Initial claims were at 481,000 for the week ending November 1st. This is up from the previous week's number of 479,000 but down from the recent high of 499,000 reached for the week ending September 27.   The four week average of initial claims, which is not as volatile, was at 475,250 the same as the previous week. 

Continued claims for unemployment insurance increased to 3,843,000 for the week ending October 25th up from the previous week's number of 3,721,000. This is the highest it has been since February 1983. The four week average for continued claims was also up to 3,754,000 from 3,711,000.

Initial claims is faster to move up and signals increases in the unemployment rate.  Continued claims take longer to go down than the initial claims once the unemployment rate is elevated.  The Unemployment rate doesn't drop until continued claims start to come down.

Unemployment is on the rise. According to "The Employment Situation" for October 2008 released today by the U.S. Department of Labor, the unemployment rate was 6.5% in October up from 6.1% in September.  Since 1948, the unemployment rate has never risen by more than .5% in a 12 month span without entering into a recession. The unemployment rate is now up 1.7% in the last twelve months and is up 1.8% from its recent low. Nonfarm payrolls decreased by 240,000 in October, by 127,000 in August and 284,000 in September.  They also revised up the number of jobs lost in August and September significantly.  The previously reported jobs lost were 73,000 in August and 159,000 in September.  Not only did the economy lose 240,000 jobs this month, but 179,000 more jobs were lost in the previous month than was reported earlier. 

Nonfarm payrolls have declined for 10 straight months with a net loss of 1,179,000.  Last month the reported number was 760,000 jobs over 9 months.  That is a huge increase.  Over the last ten years, nonfarm payrolls have increased by an average of 107,000 jobs a month to keep up with the increasing population. Nonfarm payrolls rarely decrease outside of recession periods and it is even more rare for consecutive declines. Excluding periods right before, during and after recessions, nonfarm payrolls have declined consecutively only two times: 3 consecutive times in 1951 and 2 consecutive times in 1952. At least in regards to employment, the U.S. is in a state of recession. Some sectors, like manufacturing, are just now starting to slow down. The unemployment rate will most likely continue to rise at a fast pace in the coming months.

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U.S. service industry contracts as consumers tighten belts

The Institute for Supply Management released their October 2008 Non-Manufacturing ISM Report on Business today. The Non-Manufacturing Index (NMI) came in at 44.425%. 50% is the breakpoint for growth in the non-manufacturing sector. Economists had expected a reading of 47%.  NMI had plunged to 44.6% in January 2008 but has been between 48%-52% ever since then.  This is the lowest level for NMI on record.  The service area is quickly deteriorating just like the manufacturing sector.

NMI is made up of four components: business activity, employment, new orders, and supplier deliveries. Business activity was at 44.2% in October down from 52.1% in September; employment was at 41.5% down from 44.2%; new orders were at 44.0% up from 50.5%; and supplier deliveries were at 48.0% down from 53.5%.

Here is what some of the respondents were saying:

"Financial services industry continues to be impacted by the global economic crisis — impacting all aspects and areas of the business and supply management." (Finance & Insurance)

"Economic slowdown starting to have an impact on customer count and check averages." (Accommodation & Food Services)

"Uncertainty is having the usual effect on business. Our response is traditional — stop all discretionary spending." (Management of Companies & Support Services)

"General pick-up in business in spite of all the bad economic global news." (Wholesale Trade)

"We are experiencing a slowdown in new job orders and existing job awards are lower. Clients are not extending project support professionals." (Professional, Scientific & Technical Services)

"Business down significantly! Discretionary spending disappearing." (Arts, Entertainment & Recreation)

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The unemployment rate is unchanged; nonfarm payrolls post large decline

The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance yesterday. Initial claims were at 497,000 for the week ending September 20th. This is the highest initial claims have been since September 2001. The four week average of initial claims, which is not as volatile, was at 474,000 up from the previous week's mark of 462,500.

Continued claims for unemployment insurance increased to 3,591,000 for the week ending September 13th up from the previous week's number of 3,543,000. This is the highest it has been since September, 2003. The four week average for continued claims was also up to 3,528,500 from 3,481,750.

Unemployment is on the rise. According to "The Employment Situation" for September 2008 released today by the U.S. Department of Labor, the unemployment rate was 6.1% in September unchanged from August. Since 1948, the unemployment rate has never risen by more than .5% in a 12 month span without entering into a recession. The unemployment rate is now up 1.4% in the last twelve months and is up 1.7% from its recent low. Nonfarm payrolls decreased by 159,000 in September and decreased by 73,000 in August. Nonfarm payrolls have declined for 9 straight months with a net loss of 760,000 jobs. Over the last ten years, nonfarm payrolls have increased by an average of 107,000 jobs a month to keep up with the increasing population. Nonfarm payrolls rarely decrease outside of recession periods and it is even more rare for consecutive declines. Excluding periods right before, during and after recessions, nonfarm payrolls have declined consecutively only two times: 3 consecutive times in 1951 and 2 consecutive times in 1952.

At least in regards to employment, the U.S. is in a state of recession. Some sectors, like manufacturing, are just now starting to slow down. The unemployment rate will most likely continue to rise in the coming months.

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Non-Manufacturing Index (NMI) indicates slight growth

The Institute for Supply Management released their August 2008 Non-Manufacturing ISM Report on Business today. The Non-Manufacturing Index (NMI) came in at 50.55%. 50% is the breakpoint for growth in the non-manufacturing sector. NMI had plunged to 44.6% in January 2008 but has been between 48%-52% ever since then.

NMI is made up of four components: business activity, employment, new orders, and supplier deliveries. Business activity was at 51.6% in August up from 49.6% in July; employment was at 45.4% down from 47.1%; new orders were at 49.7% up from 47.9%; and supplier deliveries were at 55.5% up from 53.5%.

Here is what some of the respondents were saying:

• "Despite constant reminders of a tough economy ... business prospects are fairly strong." (Professional, Scientific & Technical Services)
• "Fuel is easing, impacting many areas positively, but distributors are still under tremendous pressure due to the cost of diesel." (Accommodation & Food Services)
• "Although we've had some relief recently, energy prices continue to influence buying and budgeting decisions." (Public Administration)
• "New home construction continues to struggle under the weight of the current unsold housing inventory." (Wholesale Trade)
• "If the drop in oil prices can be sustained, we should see a more profitable third quarter." (Utilities)

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Initial unemployment claims inch down; continued claims continue to rise

The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance today. Initial claims were at 425,000 for the week ending August 23rd up from the previous week's revised figure of 435,000. The four week average of initial claims, which is not as volatile, was at 440,250 down from the previous week's mark of 446,250.

Continued claims for unemployment insurance increased to 3,423,000 for the week ending August 16th up from the previous week's number of 3,359,000. This is the highest it has been since November, 2003. The four week average for continued claims was also up to 3,336,500 from 3,329,250.

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Non-Manufacturing Index (NMI) is at 49.525

The Institute for Supply Management released their July 2008 Non-Manufacturing ISM Report on Business today. The Non-Manufacturing Index (NMI) came in at 49.525%.  50% is the breakpoint for growth. NMI had plunged to 44.6% in January 2008 but has been between 48%-52% for the last 6 months.

NMI is made up of four components: business activity, employment, new orders, and supplier deliveries. Business activity was at 49.6% in July down from 49.9% in June; employment was at 47.1% up from 43.8%; new orders were at 47.9% down from 48.6%; and supplier deliveries were at 53.5% up from 50.5%.

Here is what some of the respondents were saying:

• "Our business remains at about the same level as the previous month, with continued focus on cost reduction." (Finance & Insurance)
• "The general state of the home-building industry has not changed since last month; however, with the commodity and code changes going into 2009, we face much higher construction costs and reduced margins across the entire supply chain." (Construction)
• "Continue to see slowdown in local economy." (Health Care & Social Assistance)
• "While still positive, the overall outlook for 2008 for our company is not as high as earlier in the year." (Wholesale Trade)
• "Governmental spending for services is up this period." (Professional, Scientific & Technical Services)

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Personal Income increases by 0.06% in June

The Bureau of Economic Analysis released the Personal income figures for June 2008 today. Personal income increased by 0.06% compared to May 2008. May 2008 had a large increase of 1.82% compared to April 2008 due to the 2008 tax rebates. Disposable income decreased by 1.89% in June compared to May 2008. The charts below show per capita Real Personal Income, which increased by 0.60% in June 2008 compared to June 2007.

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