American households continued to increase debt levels in the third quarter of 2014, according to the New York Fed. Household debt overall increased $78 billion during the quarter. Our collective household debt as a nation now stands at $11.71 trillion. From the NY Fed quarterly report:
As anyone who looked at a tuition bill this last quarter knows, student loan debt makes up a growing percentage of the non-housing debt. The non-housing debt breaks down like this:
Download the full report here.
The deceleration of home prices continued in September, according to the Case-Shiller Home Price Indices. And for the first time in months we actually see a drop in from the previous month. The 10 and 20-city composites each dropped 0.1% from August levels. The year-over-year gains came in at4,8% for the 10-city composite and 4.9% for the 20-city composite--down from 5.5% and 5.6%.
From the release:
“The overall trend in home price increases continues to slow down,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The National Index reported a month-over-month decrease for the first time since November 2013. The Northeast region reported its first negative monthly returns since December 2013 and its worst annual returns since December 2012 due to weaknesses in Washington D.C. and Boston. The West and Southwest, previously strong regions, are seeing price gains fade. The only region showing any sustained strength is the Southeast led by Florida; price gains are also evident in Atlanta and Charlotte.
“The 10- and 20-City Composites continued their year-over-year downward trend, gaining 4.8% and 4.9% compared to last month’s year-over-year gains of 5.6%. Las Vegas, which has shown double- digit annual gains, posted an annual return of 9.1%, its first time below 10% since October 2012. Miami, however, continues to impress with another double digit annual gain of 10.3%. It is the only city that currently has a year-over-year double digit gain. Charlotte was the only city in September to show an annual increase relative to last month. Eighteen of the 20 cities reported slower annual gains compared to last month.
“Other housing statistics paint a mixed to slightly positive picture. Housing starts held above one million at annual rates on gains in single family homes, sales of existing homes are gaining, builders’ sentiment is improving, foreclosures continue to be worked off and mortgage default rates are at pre- crisis levels. With the economy looking better than a year ago, the housing outlook for 2015 is stable to slightly better.”
Read the full release here.
We crazy humans. Sometimes (always?) we set up a goal, or a measure to drive ourselves to success. But what happens when the goal and success no longer match up? Well, it seems we just stick with that goal because that is what we understand. Why we do this is for the neuroscientists and behavioral scientists to explain. At The Guardian, Diane Coyle uses the UK's soon to be released data on that country's overall wellbeing to remind us of the GDP's shortcomings as a leading indicator.
GDP is a measure of economic activity in the market and in the moment. So its key shortcoming is that it collapses time and makes us short-term in focus. It counts investment and consumption in the same way – an extra £100 spent on education is equivalent to the same amount spent on fizzy drinks.
Studies have repeatedly shown that the time horizon of the financial markets in particular is ever more short-term. Shaving about 0.006 seconds off the time it takes computer orders to travel from Chicago to the New Jersey data centre which houses the Nasdaq servers made it worth investing several hundred million dollars in tunnelling through a mountain range to lay the fibre optic cable in a straighter line. More than two-thirds of trades in US equity markets are high-frequency automated orders. How has the search for profit so foreshortened our vision?
It wasn’t always so. The term “Victorian values” now speaks to us of characteristics such as narrow-mindedness, hypocrisy and conformity, but it could also speak of hard work, self-improvement and above all self-sacrifice for the future. The list of the Victorians’ investments in our future is staggering. It includes railways, canals, sewers and roads; town halls and libraries, schools and concert halls, monuments and museums, modern hospitals and the profession of nursing; learned societies, the police, trades unions, mutual insurers and building societies – organisations that have often survived more than a century.
Why the Victorians managed to be so visionary is not entirely clear, but it had something to do with the confidence of an age of discovery both in science and other areas of knowledge, and also in geographical exploration and empire building. They made such strides against ignorance and the unknown, firm in their sense of divine approbation, it seems a belief in progress came naturally to them.
Read the full article here.
This Vox explainer tackles poverty. Or rather, it tackles one of the ways the government could try to tackle poverty--by offering a basic income. So why have policy makers not been able to put the idea into action? Watch:
For more on basic income from Vox, click here.
After slipping in August, existing-home sales rose in October. Sales increased 1.5% in October, according to the National Association of Realtors. Sales for the month were also 2.5% higher than October 2013. From the release:
Lawrence Yun, NAR chief economist, says the housing market this year has been a tale of two halves. “Sales activity in October reached its highest annual pace of the year as buyers continue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory and stabilizing price growth,” he said. “Furthermore, the job market has shown continued strength in the past six months. This bodes well for solid demand to close out the year and the likelihood of additional months of year-over-year sales increases.”
The median existing-home price2 for all housing types in October was $208,300, which is 5.5 percent above October 2013. This marks the 32nd consecutive month of year-over-year price gains.
Total housing inventory3 at the end of October fell 2.6 percent to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace – the lowest since March (also 5.1 months). Unsold inventory is now 5.2 percent higher than a year ago, when there were 2.11 million existing homes available for sale.
Read the full release here.
Here's a movement people from just about any office setting can get behind.
David Grady works in information risk management for State Street. And he's come to believe that one of the biggest risks to his productivity is the overload of bad meetings. In this TedX talk, Grady says the growth of bad meetings has become "an epidemic." Far beyond being an annoyance, the epidemic of bad meetings has cost our economy with a massive loss in productivity.
Twenty-five years (and one week) after the fall of the Berlin wall, people in Europe are in a reflective mood about the rapid changes across the continent--especially the eastern nations--a quarter-century ago. Erik Berglöf, Chief Economist of the European Bank for Reconstruction and Development, sees lessons for today in discussion of the past. At Project Syndicate, he makes a case for looking "for new bargains where all parties stand to gain."
One area on which to focus is the Ukrainian financial sector, where both Russian and Western European banks are highly exposed – and thus have a strong incentive to work together to maintain financial stability. Since June of this year, the affected banks and key authorities, together with the international financial institutions, have met in Kyiv under the Vienna Initiative framework (the next meeting is in two weeks). The banking system is in deep crisis, but at least there is a constructive dialogue involving the Russian banks present in the country.
Common interests are also evident in the gas sector – a crucial item in the Ukrainian government’s budget and perhaps the main source of corruption in the country. All sides want greater energy security: Russia wants guaranteed demand, and Europe and Ukraine want stable prices and no supply disruptions. Last month’s agreement, brokered by the European Union, to resume supplies of Russian gas to Ukraine must now be followed by genuine reform of the sector, eventually involving an international operator of the network.
A third area is trade. The deal negotiated between Russia, Ukraine, and the EU regarding the provisional application of the EU Association Agreement offered yet another opportunity to recognize joint interests. The agreement came into force on November 1, but it remains uncertain whether everyone will abide by it. If played right, ideologically less-charged trade negotiations could be an area where all parties can find common ground.
Read the full article here.
Asia is the manufacturing center of the global economy now, and so one can argue that the Pacific is the center of global trade once again. We say once again, because, as this Economist video explains, Pacific ports like Malacca had much greater influence in the early days of global trade--the 15th Century--than we realize.
Writing at VoxEU, Simon Everett sounds a warning on protectionism. Not surprisingly, the global economic crisis spurred something of a "retreat" from global trade among many countries. Perhaps more of a surprise, though, is that there have been two phases of protectionism during the global recovery, Everett notes.
With the new evidence collected for this report it becomes clear that the protectionist impulse has not abated. Since Q1 2012 the number of new protectionist measures implemented has risen, so much so that in 2013 more new protectionism was imposed than in 2009. The latter finding is all the more remarkable as the GTA team has had nearly six years to collect data on developments in 2009 and less than two years to identify protectionism in 2013. Reporting lags matter, and the initial quarterly totals for 2014 do not provide much grounds for optimism either.
In the light of the evidence presented in Figure 1, three phases in crisis-era protectionism can be identified.
•The earliest phase, starting from the first crisis-era G20 summit in Q4 2008 through to the end of 2009, witnessed a spike in protectionism in Q1 2009. Then the quarterly totals of new protectionism fell, but never below 150 new measures per quarter.
•The second phase relates to 2010 and 2011 and coincided with growing optimism that the world economy would soon recover. During this intermediate phase the quarterly totals for new protectionism lay in the 140 to 160 range.
•After that, a third phase began in Q1 2012 when quarterly resort to new protectionism steadily rose, peaking at 200 in Q4 2012.
Protectionism creates victims and the commercial interests of the major trading nations have been harmed much more than previously thought. Figure 2 summarises the extent to which the number of hits to the commercial interests of China, the European Union, Japan, and the United States have been revised upwards since the Los Cabos summit in June 2012. In the case of China, Los Cabos documented 698 occasions where foreign protectionism harmed Sino commercial interests. Now that total has been revised up to 1804 – a 158% increase. The upward revision in the incidence of harm to the EU’s commercial interests is even larger in percentage terms.
The economic recovery in the U.S. may not be moving as fast as a lot of people would like, but the improvement has been steady. The housing market does seem to be a particular annoyance to those lacking patience. And it may take a few more years before things "normalize" in the sector, according to Jason Meister, vice president at Avison Young. Meister shared his analysis of the latest housing market data with Paul Vigna on the Wall Street Journal's MoneyBeat:
In the years following the Great Recession, we have seen a rise in part-time employment in the US. The Atlanta Fed has been spending some quality time looking into what that means for wages and overall compensation, as part-time workers are less costly on that front (return on investment is another story, and we'd be interested to see data for that). From a recent post at the Macroblog, research economists Lei Fang and Pedro Silos:
Chart 1 shows the median wage growth rate of individuals over time. During the recovery, the median growth rate of full-time workers has been higher than that of part-time workers. In particular, wage declines were more common among part-time workers.
To further analyze the wage growth pattern of full-time and part-time workers, we subdivide the sample by education. Chart 2 plots the median wage growth rates for those with at least a bachelor's degree and those with some college or less. The median wage growth rates for full-time workers are larger than for part-time workers within each education group and highest for college graduates working full-time. Also apparent is that the weak wage growth of part-time workers is significantly influenced by the sluggish wage growth among those with less than a bachelor's degree.
Overall, we find that part-time workers as a group appear to experiencing a lower average wage growth rate than full-time workers during the recovery from the Great Recession. Education matters for wage growth, but the pattern of lower wage growth for part-time workers persists for people with broadly similar educational attainment.
Read the full post here.
European Banks had a check-up recently, and they did fairly well. Only 13 out of the Euro-zone's largest 130 banks failed the European Central Bank's stress tests. Wharton professor of international banking and finance Richard Herring knows a thing or two about stress tests for banks. He says the EU is now finally putting banks through "serious" tests, and the ECB is now on a path toward restoring trust in banks. He explains the process, and compares it to similar efforts in the US, in this Knowledge@Wharton interview:
The U.S. economy added another 200,000+ jobs in October, and the unemployment rate is now down to 5.8%, according to the Department of Labor. The labor force participation is back up to 62.8% (from 62.7% in September--not a significant difference). Here's a look at the unemployment trends from the Bureau of Labor Statistics:
Here are some of the key data from other areas we like to track in the monthly jobs report:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was about unchanged in October at 7.0 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.
In October, 2.2 million persons were marginally attached to the labor force, little changed from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
Among the marginally attached, there were 770,000 discouraged workers in October, essentially unchanged from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.4 million persons marginally attached to the labor force in October had not searched for work for reasons such as school attendance or family responsibilities.
Read the full report from the BLS here.
At first glance, Silicon Valley is an odd collection of strip malls, boxy, logo-adorned office parks, and low slung houses worth a lot more than one would imagine. But it all works as great soil in which to plant new tech ventures. Now, New York City, that's a place that looks, well, completely different. And yet, it may become the world's next tech hub. According to venture capitalist Eric Hippeau, the big apple is primed to move from being a place where software and applications get refined and developed to a place right at the center of the action. He explains his take in this Big Think interview:
In a new Economic Letter for the San Francisco Fed, John Krainer and Erin McCarthy take a look at the housing market. They note that recovery in housing has been slow. That seems to have a lot to do with low access to credit for new mortgages. But that may be changing:
Rising house prices chip away at the debt overhang on homeowner balance sheets. Thus, the incentives for borrowers to borrow and lenders to lend should be improving. On the lender side of the equation, we can get a sense of how credit standards have shifted over time from the Federal Reserve’s Senior Loan Officer Opinion Survey. The surveys suggest that lenders tightened standards on virtually all types of loans during the recession. This could be because earlier losses forced banks to focus on rebuilding capital buffers and reducing risk. Alternatively, lending terms may simply have been normalizing from unusually lenient standards during the housing boom. The surveys also indicate that much of this recession-era tightening dissipated fairly quickly for prime borrowers with high credit scores and low debt-to-income ratios seeking to purchase homes. Lending standards for subprime and nontraditional mortgages, however, have not eased to the same extent and had actually tightened again until recently.
Considering the basic message from the loan officer survey, one way to gauge whether credit access is changing is to look at the characteristics of actual loan flows. In Figure 1 we break down the flow of new mortgages according to their funding sources. The bottom blue-shaded section represents the percentage of privately funded loans with no government guarantee, including those from banks and private-label securitizations, that is, pools of mortgage loans that are not owned or guaranteed by government-sponsored enterprises like Fannie Mae or Freddie Mac. This group of mortgages currently makes up just under 20% of total loans. Although this is low by historical standards, the share has been growing since early 2013. Most of this increase stems not from a revival in the private-label mortgage-backed security market, but rather from an increased share of new jumbo loans that banks have retained on their balance sheets. Jumbo mortgage borrowers typically have strong credit histories, so this development is consistent with the survey result that suggests credit access has improved for prime borrowers.
A particularly important point is that bank-funded jumbo or nonconforming loans do not have any substitute readily available elsewhere in the mortgage market. To the extent that this type of lending is making up an increasing share of new mortgage lending, there appears to be some evidence that constraints on credit access are easing somewhat at this end of the market. In addition to an increasing share, the interest rate spread for jumbo mortgages began to narrow towards the end of 2013. The drop in rates coinciding with the increase in the jumbo share suggests that the supply curve of the banks has shifted in favor of holding these loans.
Read the full letter here.
The World Economic Forum's Global Gender Gap 2014 is out, and the Nordic nations dominate the top of the rankings. Iceland, Finland, Norway, Sweden, and Denmark, all score above 0.8 (the highest possible score is 1). The next two nations would be more of a surprise to most. Nicaragua, having cracked the top 10 two years ago, comes in at 6. Rwanda makes its debut on the rankings at 7, thanks in part to a high level of political participation among women and the top ranking in labour force participation.
Explore the ranking via this heat map.
You can access the full report, including data tables, here.
And watch a summary of the report below:
Top executive pay keeps going up, according to Mercer MThink. Performance awards have become the norm at many top corporations, so the rising stock values are one part of the significant increases over the last two years, but Long Term Incentives might be the most interesting piece of the puzzle, at least for CEOs. (full-size graphic available here):