Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive
150x172_CUEffect.jpg
Contacts
LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
RON JOOSSASSISTANT EDITOR
ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

Market Archive

Market

Credit card, home finance balances up for 3rd month: Equifax

 Permanent link
ATLANTA (2/27/14)--For the first time in more than three years, the total outstanding balances of home finance and credit card balances rose for three consecutive months, according to Equifax.
 
The latest Equifax National Consumer Credit Trends Report found that January saw outstanding balances of $8.59 trillion for home finance; $555.4 billion  for financial institution-issued credit cards, and $62.2 billion for retailer-issued cards.
 
"Home purchase transactions, in which first time homebuyers take on entirely new mortgage debt and move-up buyers increase their existing mortgage debt, have finally overtaken foreclosures and accelerating pay-downs, resulting in increases home finance balances," said Equifax Chief Economist Amy Crews Cutts. "American consumers have shed more than $1.5 trillion in mortgage debt since the start of the financial crisis and only now seem interested in investing in housing again," she added.
 
The home finance category includes first mortgage, home equity installment and home equity revolving balances. First mortgage balances increased 2.5% to $7.9 billion from $7.7 billion--the largest year-over-year increase in more than three years.
 
Balances on retail cards have been edging up for some time, she said, perhaps because consumers want to pigeonhole large purchases or take advantage of special deals tied to retailer-issued cards.
 
More than 315 million loans are outstanding in financial institution-issued credit cards, the highest since October 2009. The total of new card accounts from January to November 2013 is 39.6 million, which is also a five-year high.
 
The total number of new retailer-issued card accounts increased 8.9% year over year, with 35.9 million new cards. That is the highest since 2007.

FHFA housing price index edges up for 10th quarter

 Permanent link
WASHINGTON (2/26/14)--House prices rose 1.2% in the fourth quarter of 2013--the 10th consecutive quarterly increase in the index tracked by the Federal Housing Finance Agency (FHFA).
 
"Home price appreciation in the fourth quarter was considerable, but more modest than in recent periods," said Principal Economist Andrew Leventis in the FHFA's report on the purchase-only, seasonally adjusted index.
 
According to numbers released Tuesday, house prices rose 7.7% from the fourth quarter of 2012 to 2013's fourth quarter. The monthly U.S. purchase-only index came in at 208.3 for December, up by 0.8% from the revised November level of 206.7.
 
The boost in house prices for 10 quarters has stirred some concern about an overheating market, according to Moody's analysts (Economy.com Feb. 25). "The possibility of overheating is caused by an undersupplied market, not by a mortgage lending bubble," Moody's noted.
 
Mortgage lending is of high quality with the share of Fannie Mae and Freddie Mac mortgages financing distressed sales falling by half or more in three-quarters of the areas covered over the last year.
 
Many U.S. metropolitan markets are substantially undervalued, foreclosure inventories are at their lowest level since early 2008, and single-family construction has not caught up with demand, analysts said.
 
 

Economy underwhelms in January, Chicago Fed says

 Permanent link
CHICAGO (2/25/14)--Economic activity slowed for the second straight month in January, likely dragged down by the severe winter weather, according to numbers released Monday by the Chicago Federal Reserve.
 
The Chicago Fed National Activity Index (FNAI) decreased to -0.39 in January from -0.03 in December. It looks at 85 economic indicators such as production, jobs, housing, consumer spending and inventories. Negative values signal a below-average rate of economic growth.
 
The labor market improved slightly after December came in slow. The 113,000 tick upwards in payrolls leaves concerns about job market strength, according to Moody's analysts (Economy.com Feb. 24). Weakness in jobs, housing and industrial production could be ascribed to disruptive winter storms. Pent-up demand likely will boost numbers when the weather improves (MarketWatch Feb. 24).
 
The CFNAI's three-month moving average, a better indicator of economic trends, dipped to 0.1 from 0.26. That is slightly above neutral and suggests the economy is on pace with historical trends, Moody's said. A zero reading means that the economy is growing at its historical trend, while positive values signal above-average growth.
 
The prospects for 2014 remain upbeat, however, with last year's threats losing their strength, analysts said. The federal budget and debt-ceiling issues put fiscal uncertainty off the table until 2015, and Federal Reserve policy also appear to be stable.

Fannie Mae payments will exceed U.S. bailout funds

 Permanent link
WASHINGTON (2/24/14)--Fannie Mae will soon fully reimburse the federal government for the $116.1 billion bailout it received after the worldwide financial crisis in 2008.
 
Its net income in the fourth quarter last year reached $6.5 billion, pushing its total 2013 profit total to $84 billion, the publicly operated mortgage finance company said Friday in regulatory filings. The gains mean that Fannie will soon give the Treasury Department $7.2 billion, bringing its total bailout reimbursement to $121.1 billion--a sum that includes $1 billion in preferred stock obtained by Treasury in 2008 (Bloomberg Feb. 21).
 
After the payment, Fannie and its sister firm Freddie Mac, will have returned around $192.5 billion in dividends to the Treasury, exceeding the $187.5 billion rescue package the two firms received in 2008 (The Wall Street Journal Feb. 21). The pair paid $130 billion to the Treasury Department last year, the first that required them to pass on the majority of their net income to taxpayers.
 
Rising home prices boosted Fannie's bottom line, according to The Wall Street Journal. As a result, executives warned that a cooling housing market should slow the firm's revenue stream in 2014. Its inventory of foreclosed properties was up at the end of last year for the second straight quarter, in spite of eight straight profitable quarters, and institutional investors have been curbing demand in recent months. Fannie's fourth quarter profit was lower on a year-over-year basis, by $1.1 billion.
 
However, barring a sharp economic downturn or the downfall of the two government-sponsored housing enterprises, Fannie and Freddie likely will continue to pay billions back to the Treasury, albeit not at 2013's pace (News Now Feb. 12).
 
Fannie CEO Timothy Mayopoulos told reporters, according to Bloomberg, that the firm's profitability should not justify further delays for housing-finance reform. Mayopulos also said Friday that the new FHFA director Melvin Watt, a former Democrat congressman appointed in January, has not yet announced his priorities for the firm. Senators are currently working on legislation to reform Fannie and Freddie, according to The Wall Street Journal. The White House has warned that the chance of it passing is growing slimmer with time, as November's midterm elections approach.

'Resilient' economy persevering despite weather, says Conference Board

 Permanent link
WASHINGTON (2/21/14)--The economy appears to have weathered unusually harsh winter months, according to data released Thursday by the Conference Board.
 
The research firm's Leading Economic Index (LEI) increased by 0.3% in January after stagnating in December. Conference Board economists said this indicates that the U.S. economy is "expanding moderately" and that it "will remain resilient in the first half of 2014."
 
Five of 10 LEI components pushed the measure upward. The interest rate spread made the most positive contribution, with building permits being the largest drag on the gauge (MarketWatch Feb. 20). MarketWatch said that winter storms have been especially tough on retail sales and the housing market.
 
The differing components reflect recent conflicting reports about the state of the economy. The Federal Reserve Bank of Philadelphia said Thursday that regional manufacturing fell significantly in February due to snowstorms. MarketWatch also reported that a separate indicator of U.S. manufacturing was at its highest level since 2010. The Conference Board's Coincident Economic Index (CEI), a measure of current conditions, also grew by 0.1% in January.
 
Both the CEI and the LEI have grown over the past few months, with the latter having increased by 3.1% in January and the five months preceding it.
 
Conference Board economist Ken Golstein warned that consumer demand and investment need to increase to accelerate growth.
 
The LEI is a composite measurement of:
  • Average weekly manufacturing hours;
  • Average weekly initial unemployment insurance claims;
  • Manufacturers' new orders;
  • The Institute for Supply Management index of new orders;
  • Manufacturers' new orders excluding defense capital goods and aircraft orders;
  • Building permits for private housing units;
  • The prices of 500 common stocks;
  • The Leading Credit Index;
  • The interest rate spread of 10-year Treasury bonds; and
  • Average consumer expectations for business conditions.

Mortgage demand slumps; housing has fits, not starts

 Permanent link
WASHINGTON (2/20/14)--The housing market is continuing to take a beating from winter weather, according to a pair of reports published Wednesday, and it appears to be dragging down the entire economy.
 
Mortgage applications measured by the Mortgage Bankers Association fell by 4.1% for the week ending Feb. 14, while housing construction starts grew by 880,000 annualized units in January, according to the Census Bureau.
 
The January housing starts were down 16% on a month-to-month basis, 2% on an annual basis, and lower than expected (Economy.com Feb. 19).
 
The findings caused prominent economists to revise down their forecasts for first quarter GDP growth. Barclays cut its forecast for annualized growth by three-tenths of a percentage point, while Morgan Stanley and Macroeconomic Advisers both reined in forecasts by one-tenth of a point (MarketWatch Feb.19).

The Census report also revealed that, while completions were up by 4.6% on monthly basis, permits were down by 5.4%, meaning that construction could lag over the coming months.
 
In addition to an unusually cold winter, longer-term drags on housing demand have also hindered building, as the most recent MBA report showed. The trade association's indexes of purchase and refinancing were both down by 2.7% and 6.3% on a weekly basis, and 62% and 14% on an annual basis (Economy.com Feb. 19). A four-week moving average of refinance activity is up by 13% over the past month, but near a five-year low, according to Moody's. A 12-week moving average of the purchase index is also at a two-year low.
 
The ratings and research firm said this is due to higher interest rates, which are expected to increase more in 2014. Although the latest MBA report showed key interest rising for only the first time in about a month and a half, they are significantly higher on a yearly basis--the average contract rates for 30-year fixed-rate and 5-year adjustable-rate mortgages are up by 72 basis points and 54 basis points. For the week ending Feb. 14, the former was up by five basis points to 4.5%, while the latter was up by nine basis points to 3.2%. The average rate for a 30-year fixed-rate jumbo mortgage was also up on a weekly basis, by five basis points to 4.45%.
 
Analysts believe the downturn will reverse soon, despite the rising interest rates. Moody's said that the state of the industry won't be clear until the springtime, when it expects stronger demand due to diminished uncertainty over fiscal conditions and expected gains in the jobs market. MarketWatch said that building data should recover in March and April, as firms speed up construction in warmer weather.
 
Moody's did warn, however, that rising interest rates, higher material and land costs, and labor and lot scarcity could constrict supply more than its analysts currently expect.

Unemployment to lose spot for forward guidance, Fed minutes say

 Permanent link
WASHINGTON (2/20/14)--It appears the unemployment rate will be knocked out of its spot in providing forward guidance to the Federal Open Market Committee, according to minutes from its Jan. 28-29 meeting.
 
The Fed's policymaking body released its minutes Wednesday, which said, "Participants agreed that, with the unemployment rate approaching 6.5%, it would soon be appropriate for the Committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed."
 
The FOMC's post-meeting statement said the "current exceptionally low target range for the federal funds rate of 0% to 0.25% will be appropriate at least as long" as the unemployment rate remains above 6.5% (News Now Jan. 29).
 
"A few participants raised the possibility that it might be appropriate to increase the federal funds rate relatively soon," the minutes noted.
 
Some favored quantitative guidance along the lines of existing thresholds such as the 2% target inflation rate. Additional proposals included relying more on the Summary of Economic Projections and "an indication of the Committee's willingness to adjust policy to lean against undesired changes in financial conditions."
 
Moody's Economy.com said the Fed has options. "It could stress the importance of other employment data improving before it begins to normalize interest rates. For example, the Fed could focus on the labor force participation rate or employment-to-population rate," analysts noted (Feb. 19).
 
The policymaking group said it would add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month.
 
"Several participants argued that, in the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace of purchases by a total of $10 billion at each FOMC meeting," the minutes said. "That said, a number of participants noted that if the economy deviated substantially from its expected path, the Committee should be prepared to respond with an appropriate adjustment to the trajectory of its purchases."

Bitcoin's trial by fire into 2014

 Permanent link
NEW YORK (2/19/14)--2013 was a big year for digital currency Bitcoin in terms of building visibility. One of the currency's longtime developers, Jeff Garzik, says 2014 will be a big year in terms of "action."

An article in The New York Times' Deal Book, a financial news service reporting on mergers, acquisitions, venture capital and hedge funds, warned, however, that if Bitcoin is to succeed it will have to prove to be built sturdy enough to withstand "increasingly difficult conditions."

Along with an looming spectre of regulation on its horizon, Bitcoin also must address: a software glitch that that forced some big Bitcoin exchanges to shut down for days because of problems with moving Bitcoins between digital accounts, and; an apparent system vulnerability to hacking attacks that call its security network into question.

Bitcoin's Garzik was quoted as saying that the problems exposed recently should not be a long-term issue for the network. But he did also acknowledge that Bitcoin faces significant tests into the future. Garzik now works for the Bitcoin company Bitpay.

Calling the virtual currency operation he helped found a very young ecosystem, Garzik said it is the nature of the nascent field that more attacks will be comng down the virtual pike--likely bigger and more disruptive than what has been seen.

Deal Book also looked at the burgeoning regulatory discussions that are entering the burgeoning digital currency arena. It identified Benjamin Lawsky, New York's financial services superintendent, as the leading figure in this country's attempts to establish regulations for virtual currencies. In fact, the article noted that that Lawsky said recently that he hopes to propose an operating framework later this year.

That happened on the same day that Canada's finance minister, Jim Flaherty, announced his plan for national rules.  On the other hand, Russia recently decided just to decalre virtual currencies illegal.

Consumer confidence ticks up

 Permanent link
NEW YORK (2/14/14)--Although dismal weather seems to abound, there is a sunnier picture being painted of consumer confidence, according to the most recent Bloomberg Consumer Comfort Index (CCI).

Bloomberg reported Thursday that for the first time in five weeks, Americans are feeling a bit more upbeat about the nation's economy.  In fact, CCI increased to minus 30.7 in the week ended Feb. 9, up a good bit from minus 33.1 the prior period. Also of note is that one measure of the state of the economy jumped to the highest level it's been since September.

So what's behind the boost in outlook?  Bloomberg posits that for high-income earners it was likely last week's rebound in stock prices. For others it may have been reports of faster job creation, which comes hand in hand with stronger wage growth.  That in turn boosts consumer spending, which Bloomberg notes accounts for 70% of the economy.

Weekly mortgage apps down; MBA remains guarded

 Permanent link
WASHINGTON (2/13/14)--Mortgage market activity diminished slightly during the week ending Feb. 7, the Mortgage Bankers Association said Wednesday, after the group's chief economist warned that the recovery faces significant obstacles.
 
The most recent report shows that the MBA market composite index retreated by 2%. Its purchase index component fell by 5%, while its gauge of refinance applications dropped by 0.2%.
 
The slight downturn in demand came despite data showing key mortgage interest rates falling for the fifth consecutive week ( Economy.com Feb. 12). An average of 30-year fixed-rate mortgages dropped by 2 basis points to 4.45%, while a measure of five-year adjustable-rate mortgages dropped by 4 basis points to 3.11%. The rate for a 30-year fixed-jumbo mortgage also fell by two basis points to 4.4%.
 
The 30-year fixed-rate conventional average is lower than it was four weeks ago, by 21 basis points, but higher on a year-over-year basis by 70 points. The five-year adjustable-rate average is also higher than it was a year ago, by 45 basis points.
 
Refinance activity for the week ending Feb. 7 accounted for 62% of all applications--a proportion that stagnated on a weekly basis--while the share of adjustable-rate mortgages increased to account for 8% of the industry total.
 
The most recent MBA measures show that mortgage demand has slightly improved over the past few weeks but remains relatively meager. A four-week moving average of refinance activity rose by 18.4% over the past four weeks, but is lower by 63% on a year-over-year basis. Purchase applications are 2.8% higher than they were a month ago, but 13.5% lower on an annual basis.
 
MBA Chief Economist and Senior Vice President Michael Fratantoni warned Tuesday that lackluster public sector hiring and various economic woes overseas are hindering the U.S. recovery. The MBA is predicting that annualized GDP growth will be at 2.3% in the first quarter, and 2.6% in the second quarter ( Commercial Property Executive Feb. 11). It is also predicting that data will show GDP grew by an annualized 2.5% in the fourth quarter of 2013, after growing by 4.1% the previous quarter.
 
Moody's analysts intoned that the strength of mortgage demand is precarious. They cited National Association of Realtors data which showed that cash buyers made up 32% of existing home-sale transactions in December, while first-time buyers "accounted for only 27% of purchases." The analysts called application activity "lethargic" and pointed out that the MBA composite index is near its lowest level since 2001. Tight lending standards, they said, are partially to blame, with recent surveys showing banks increasing scrutiny of potential borrowers.

Fannie-Freddie payback could top bailout soon

 Permanent link
NEW YORK (2/12/14)--Fannie Mae and Freddie Mac may report earnings later this month that will result in the mortgage financing giants paying the U.S. Treasury more than the $187 billion in government bailouts they received starting in 2008 (CNNMoney Feb. 10).

As a result of a recovering housing market and a significant one-time gain sparked by accounting rules, Fannie and Freddie paid a combined $130 billion to taxpayers last year alone.  That was after paying only $55 billion for the four years from 2008 through 2012.

Barring another sharp economic downturn--or the demise of the two government-sponsored housing enterprises--Fannie and Freddie are likely to continuing paying billions to Treasury, though not at the 2013 rate.

If the government hadn't changed the repayment rules at the beginning of last year--with Fannie and Freddie turning over most of their profits to the government each quarter--it would likely have been another six years before taxpayers recouped the government funds expended on keeping the GSEs going.

CNNMoney notes, however, that not everyone is happy about the accelerated payback to taxpayers.

A hedge fund has filed a lawsuit arguing that the bigger repayments are in violation of the law and that if profits are being returned to taxpayers, then the government should give up some of its 80% of shares in return--thereby increasing the value of private investor-held shares.

A second suit, filed by low-income housing groups, charges that the original bailout law also demands that some of future Fannie and Freddie profits go into a government trust fund to provide affordable housing to the country's low-income and homeless populations.

Consumers see brighter mortgage availability picture

 Permanent link
WASHINGTON (2/12/14)--Consumers are beginning to perceive an easing in mortgage credit availability, according to a Fannie Mae January 2014 national survey of consumer attitudes in housing. More consumers believe they could get a mortgage easily and fewer thought it would be difficult, apparently showing consensus among optimists and pessimists that mortgage credit is becoming more accessible.

Attitudes climbed to an all-time survey high of 52%--a two percentage point jump--in how easily consumers believed they could get a house loan.  Those who thought it would be difficult to land a loan dropped three points, down to 45% (HousingWire Feb. 11).

Other survey findings highlighted by HousingWire included:
  • The average expectation of a 12-month home-price change dropped from last month, to 2%;
  • The share of people expecting home prices will remain stable in the next 12 months increased seven percentage points to 45%, while the share who predict increases in home prices over that period dropped six percentage points to 43%;
  • Respondents who say mortgage rates will go up in the next 12 months dropped by two percentage points, to 55%;
  • Well more than half of respondents believe it is a good time to buy a house, but their numbers went down two percentage points to 65%;
  • Those who say it is a good time to sell a house increased 5 percentage points from last month, to 38% from 33%;
  •  The economy is on the right track according to just 39% of respondents, but that is an eight-percentage point climb from last month; and,
  • Back to the optimists, the percentage of survey particpants who expect their personal financial situation to improve over the next  year is up over last month, to 44%.

Jobs, business trends continue on upward path

 Permanent link
NEW YORK and WEST CHESTER, Pa. (2/11/14)--The results from a pair of surveys published Monday indicate that businesses still plan on hiring, despite two months of U.S. Labor Department reports hinting at the increased possibility of a job market slowdown.
 
The latest statistics calculated through Moody's worldwide business confidence poll and the Conference Board Employment Trend Index showed that firms are, on the whole, preparing to take on new workers ( Economy.com Feb. 10).
 
The Moody's study showed that almost half of respondents currently are hiring, while "a very small percentage" is shedding workers. The firm said that its measure shows hiring at its strongest level since 2003, when the survey began. The survey also revealed the real estate sector feeling most generally upbeat, while manufacturers and retailers are, relatively speaking, most glum.
 
The Conference Board Employment Trends Index was up in January to 116.61 from a downwardly revised 115.62 in December. The monthly gain put the January year-over-year increase up to 6%.
 
Driving the ETI boost were the fact that six out of its eight components all revealed improved labor market conditions.
 
"Despite weak job reports in December and January, the Employment Trends Index is not signaling a slowdown in employment growth," Conference Board Director of Macroeconomic Research Gad Levanon said. "We expect solid job growth and rapid declines in the unemployment rate to continue in the coming months."
 
Contrasting with the Monday studies is Friday's Labor Department report, which showed payrolls only increased by 113,000 in January and a slightly upwardly revised 7,500 in December, after expanding by 274,000 in November ( News Now Feb. 10).
 
Moody's analysts said that changing political conditions have improved business' outlook, with optimism improving both after the end of the partial government shutdown in October and in the wake of the two-year budget accord in December. However, the survey revealed that businesses are most concerned about regulations and litigation, with more than one-third of respondents citing the issue as their biggest worry  ( Market News Feb. 10).
 
Overall, about one-half of all responses to Moody's nine questions were positive. The all-time average is closer to about one-third of replies.
 
Three-fourths of those polled said that they expect the economy to improve throughout the first six months of 2014, revealing a forecast more upbeat than the current outlook.
 
The worldwide difference between all positive and negative responses was 40% last week and 37% on a four week moving average. The same measurement in the U.S. was at 44% last week and 42% on a four-week moving average.
 
Historically, when less than 10% of responses are net positive, the economy is in recession. Readings between 20% and 30% reveal an economy expanding at potential.

Revolving credit drives consumer credit increase

 Permanent link
WASHINGTON (2/10/14)--Consumer credit issued by credit unions rose on a non-seasonally adjusted basis by $1.8 billion in December, as revolving credit balances drove an overall increase in U.S. consumer credit, according to Federal Reserve data released Friday.
 
U.S. consumer credit for the month increased by $18.8 billion to $3.1 trillion, a seasonally adjusted rate of 7.3%, the most in nearly a year due to a rise in credit card usage ( Reuters Feb. 7).
 
Revolving credit balances edged $5 billion higher, after rising a $465 million in November--the largest one-month increase in revolving loan balances since May ( Economy.com Feb. 7). Consumers may be growing less hesitant in taking on additional credit as the job market improves, Economy.com said.
 
Year-earlier growth in revolving credit balances accelerated to 1.9%, ahead of the fourth quarter average of 1.3% and the 1% average over 2013.
 
Non-revolving balances increased $13.8 billion from last month and have not fallen since August 2011. The December increase is above the $13.2 billion average gain over the past three months.
 
Auto loans increased $12.6 billion to $1.2 trillion in the fourth quarter. Student loans outstanding rose by $7 billion to $873 billion in the fourth quarter.
 
Year-earlier growth in non-revolving credit balances continues to outpace that of total balances, running at 8% in December, slightly below the 8.4% pace of 2013.

Labor Dept.'s weak jobs number disappoints

 Permanent link
WASHINGTON (2/10/14)--A report released Friday by the Labor Department showed the second consecutive month of lower-than-expected job growth, confounding experts.
 
U.S. payrolls increased by 113,000 in January, while the initial December report was only upwardly revised by 1,000 to 7,500.
 
"This is a particularly weird month, coming as it does after December's strange and less-than-fully believable results," said Bill Hampel, chief economist of the Credit Union National Association ( CNNMoney.com Feb. 6).
 
The private sector added 142,000 jobs, while the public sector cut 29,000 positions ( The New York Times Feb. 7). Construction and manufacturing sectors added 48,000 and 22,000 jobs, up from reductions of 22,000 and 8,000 in December, but the service industry added just 66,000 jobs, down from 102,000 last month ( Economy.com Feb. 7). Financial services also shed 2,000 workers, which Moody's attributed to a decline in foreclosure and mortgage refinancing activity.
 
The extent to which weather was a factor is unclear, given the hiring in some sectors and job losses in others. The poll was also taken during a week in which the weather was relatively calm. But Moody's said that the labor market has not fundamentally changed and results were "far below consensus" forecasts. The New York Times reported that economists expected payrolls to swell by 180,000 in January. Moody's analysts, who had previously predicted an increase of 175,000 jobs in January (See Friday's News Now: Sharper decline than expected for jobless claims), said that monthly payroll should be more than 200,000 "once the snow melts and temperature rises."
 
The late December withdrawal of extended unemployment benefits from 1.35 million Americans doesn't appear to have significantly affected the labor force. The labor force participation rate increased to 63% in January from 62.8%, while the unemployment rate declined to 6.6%, from 6.7%. Moody's, however, warned that workers whose long-term benefits haven't been renewed by Congress should be "expected to leave the labor force" over the next few months.
 
In a shred of good news from Friday's report, payroll additions in November were revised up by 33,000 to 274,000.
 
The New York Times cautioned that the January report could "spur fears" of "yet another slowdown" in the labor market. It added that the Federal Reserve's decision to cut quantitative easing by $10 billion in both January and February is "looking increasingly premature."

Sharper decline than expected for jobless claims

 Permanent link
WASHINGTON (2/7/14)--Initial jobless claims for the week ending Feb. 1 fell by 20,000 to 331,000, according to Labor Department data published Thursday.

Economists had expected claims to recede, but the decrease was greater than they had expected. Moody's said that "the drop was a little more pronounced" than its analysts had anticipated, while the Wall Street Journal had expected Thursday's numbers to reveal 335,000 new claims ( Economy.com, The Wall Street Journal Feb. 6).

The four-week moving average of initial claims rose by 250 to 334,000, after having steadily increased from a recent trough of about 305,000 in late September.

The number of claims for the week that ended Jan. 25 was revised up by 3,000 to 351,000. Continuing claims that week--benefits accrued for more than seven days--rose by 15,000 to 2.96 million. The Jan. 25 continuing claims figure, released for the first time Thursday, showed a net increase of about 200,000 since early December.

States that saw the largest increases in initial filings for the week ending Jan. 25 were Indiana, Massachusetts and Nebraska. New York, Texas and Michigan played host to the largest declines.

Moody's said that the drop in filings for the week ending Feb. 1 might have exceeded expectations because severe weather in the south hindered travel. The winter holidays and snowstorms have "wreaked havoc on the data" in recent months, the ratings and research said. A Labor Department official said, according to The Wall Street Journal , that Kansas claims in the most recent report had to be estimated because bad weather halted data collection in the state.

Moody's analysts also said that other recent surveys indicate that job growth in January--to be reported Friday by the Labor Department--shouldn't greatly differ from previous months. The firm is forecasting an addition of 175,000 workers to the payrolls and for the unemployment rate to slide down to 6.6%. Economists polled by Dow Jones expect the numbers to reveal an increase of 189,000 jobs in January, according to The Wall Street Journal .

The paper also said that the Federal Reserve will be closely watching the report on Friday to determine how to proceed with its quantitative easing adjustment. In spite of unexpectedly low jobs numbers for Decemeber--which, The Wall Street Journal said, "was widely dismissed as a fluke caused by unusually cold and stormy weather"--the Fed's Open Market Committee will taper its monthly asset purchases by another $10 billion to $65 billion this month.

Majority of small-biz owners optimistic, says Newtek survey

 Permanent link
NEW YORK (2/6/14)--Small business owners have high hopes for 2014, according to a monthly survey released Wednesday.
 
A Newtek Business Services Inc. poll of 1,500 small business owners found that 62% "have an optimistic outlook" for this year, while 12% are pessimistic and 26% reported having neither positive nor negative forecasts.
 
The study also found that 30% of business owners are gearing up to add personnel, 62% don't plan on hiring or shedding workers from their payrolls, and 8% are planning to downsize staff.
 
Barry Sloane, president/CEO of Newtek's Small Business Authority, said that an improving recovery is beginning to encourage smaller entrepreneuers.
 
"We are glad to see this, as this is a precursor to small business economic growth," he said. "Without this confidence there isn't risk taking, and without risk taking you cannot obtain growth."
 
Newtek is a firm that offers businesses, including credit unions, services related to business lending, health and benefit insurance, merchant processing, payroll services, data storage and website issues. It has been a CUNA Strategic Services alliance provider since February 2003.

Bitcoin regulation may be matter of how much, not when

 Permanent link
WASHINGTON and NEW YORK (2/6/14)--A U.S. Treasury Department guidance issued this week and state-level hearings held last week in New York highlight the burgeoning movement to regulate Bitcoin and other virtual currencies.
 
Treasury's Financial Crimes Enforcement Network (FinCEN) clarified previous guidance on Tuesday, narrowing the number of Bitcoin transactions subject to Bank Secrecy Act (BSA) statutes, while New York District Attorney Cyrus Vance and Deputy U.S. Attorney for the Southern District of New York Richard Zabel last week called for stricter rules governing the use of the online financial instrument.
 
The latest FinCEN guidance stated that how a person obtains Bitcoin is not relevant for its legal considerations, but what a person uses it for is ( Compliance Week Feb. 4.) It is the latest iteration of a March 2013 guidance, which stated that administrators and exchangers of convertible virtual currencies are considered money transmitters under the law. The new guidance clarifies that neither users "mining" Bitcoins for their own benefit nor companies purchasing and selling Bitcoins to invest in itself are considered money transmitters under BSA , according to Compliance Week .
 
Law enforcement officials are concerned about identity-concealing virtual currencies. Vance said at last week's hearing that Bitcoin is allowing "cybercriminals, identity thieves, traffickers of child pornography, and other malevolent actors to operate in a digital Wild West" ( Bloomberg.com Jan. 30).

U.S. Attorney Zabel said that the currency is an ideal vehicle for tax evasion and money laundering, and, at the hearing to debate the proper state regulations in New York, the pair dismissed entrepreneurs' arguments that law enforcement actions--like the Jan. 27 federal indictment of Bitcoin traders for alleged money laundering--demonstrate that current rules suffice.
 
One observer, Wayne State University Law School professor Peter J. Henning, said that these developments make the debate over enhanced virtual currency regulations not a matter of if or when, but how much ( The New York Times Feb. 3).
 
Henning speculated that the government might seek to mandate disclosures if an individual or company controls or trades more than a certain amount of a virtual currency. Additionally, it might look to create centralized clearing houses "so that the market is less susceptible to manipulation," he said. Hennig also theorized that the government might seek to create consumer protections, considering that virtual currencies are prone to dramatic fluctuations without a central bank or other authorities working to maintain stability.
 
"That type of volatility is an invitation to unscrupulous dealers and merchants to overcharge or underpay," he said. "To protect consumers who want to use Bitcoin for legitimate transactions, the government may adopt reporting requirements on virtual currency exchanges so that there is a public repository of information about prices."
 
However regulators move forward on this issue, the most influential new laws are likely to be enacted in New York, according to Bloomberg . The March 2013 Treasury directive on virtual currencies said that state-licensed money transmission rules should apply, but only New York has publicly debated rules specifically targeting virtual-currency ventures. Bloomberg said that "its steps could set the tone for other states."

CU loans outpace savings for first time since '07: CUNA

 Permanent link
MADISON, Wis. (2/5/14)--Credit union lending outpaced savings in 2013, the first time that has happened since 2007, according the Credit Union National Association, which Tuesday released its monthly sample of estimates for December. Credit unions reported loan balances rose 6.8% last year, up from the 4.8% in 2012.
 
Click to view larger image Click for larger view
"Credit union members were in a car-buying mood with new auto loans and used auto loans up 10.9% and 8.9%, respectively," said Steve Rick, CUNA senior economist.
 
Savings growth decelerated to 4.3% in 2013 from 6.1% one year earlier. Credit union savings balances declined 0.1% in December compared with a 0.9% increase in November. One-year certificates (1.1%) and money market accounts (0.6%) increased during December. Share drafts, regular shares and individual retirement accounts declined 5.3%, 0.1%, and 0.04%, respectively.  
 
Credit union loan balances are expected to rise 7% in 2014, Rick said. "Expect households to release pent-up demand for autos, furniture and appliances over the next two years," he added.
 
With loans growing faster than savings, the loan-to-share ratio rose to 70.3% in December 2013, from 68.6% in December 2012.  This helped increase the yield on asset ratio in the second half of the year, reversing its six-year slide.
 
Click to view larger image Click for larger view
"On the savings side of the balance sheet, members continue to look for safe, short-term liquid deposit accounts," Rick said. Regular share balances rose 8.6%, followed by money market accounts up by 3.9% and share draft accounts up 5.9%.
 
Credit union savings balances are expected to grow 4% in 2014. The savings rate will remain below the 6.7% average of the last 20 years as the economic recovery encourages household to spend rather than save.
 
Credit union membership rose by 2.9% in 2013 to reach 98.87 million. "We should see credit union memberships climb above the 100 million mark sometime in May or June 2014," Rick said.
 
 Asset quality remains strong as shown by the 60-day-plus delinquency rate has remained at 1% for the past 10 months.

Rising housing prices moderated by supply in '14

 Permanent link
IRVINE, Calif. (2/5/14)--U.S. house prices were up by 11% in 2013, according to data released Tuesday, but rising home values could slow this year due to a spike in construction over the past few months.
 
The CoreLogic Home Price Index revealed the 22nd consecutive month of year-over-year appreciation, while showing a less-than-expected 0.1% decline in the December measure--CoreLogic doesn't adjust for seasonal fluctuations, and the aggregate single-family index typically drops by more than 0.1% in winter months, according to Moody's (Economy.com Feb.4). Excluding distress sales, the December index increased by 0.2% on a monthly basis and 9.9% on a year-over-year basis.
 
Moody's said that strong demand since the middle of 2011 and lackluster construction activity throughout most of last year have driven home values up, but that a significant rise in housing starts in November and December should cause inflationary pressure on home prices to decelerate this year.
 
CoreLogic chief economist Mark Fleming echoed this assessment, saying that the firm expects "rising prices to attract more sellers, unlocking this pent-up supply, which will have a moderating effect on prices in 2014."
 
The latest CoreLogic data, including distress sales, shows that the company's home price index has risen 22% since bottoming out after the recession in March 2011, although it is below its April 2006 apex. The gauge excluding distress sales is 13.6% below its all-time high, also in April 2006, but is 18% higher than its most recent February 2012 low.
 
Prices including distress sales steadily increased throughout the country in 2013, with 95 out of the top 100 metropolitan areas by population showing year-over-year appreciations. Only three states saw home values drop last year--Arkansas, New Mexico and Mississippi saw depreciation of 1.5%, 1.3% and 0.2%.
 
States that saw the largest home price increases were Nevada, California and Michigan, at 23.9%, 19.7% and 14%. Oregon and Georgia also played host to large annual gains, at 13.7% and 12.8%. Metropolitan areas with the most rapid rise in home prices were Riverside, Calif., at 22%, and Los Angeles, at 19.1%. Atlanta, Phoenix and Chicago saw the next three most dramatic rises, at 15%, 13.9% and 12.5%.
 
CoreLogic is also predicting that home prices, including distress sales, increased in January by 10.2% on an annual basis and dropped by 0.8% on a monthly basis. Excluding distress sales, the measure is expected to have increased last month by 9.7% on a year-over-year basis and 0.2% on a monthly basis.

Weather puts chill on December manufacturing

 Permanent link
TEMPE, Ariz. (2/4/14)--The results of a monthly survey of manufacturing managers released Monday indicates that cold weather may have frozen economic growth in January.
 
The Institute for Supply Management manufacturing index dropped to 51.3 from 56.5 last month--a more pronounced deceleration than economists had predicted. Moody's said the index "came in weaker than we expected," while a survey of economists conducted by MarketWatch forecast a 0.5 point dip in the index (Economy.com Feb. 3, MarketWatch Feb. 3).
 
Analysts for both research firms noted that the index's poor performance may only be temporary due to an unusually cold and snowy January. Many executives polled directly attributed the slowdown to weather conditions, with one pointing out that it "impacted outbound and inbound shipments," according to MarketWatch.
 
MarketWatch also noted that January's cold snap may have chilled the labor market, with the ISM employment gauge having fallen 3.5 points to 52.3%. A poll of economists conducted by the company predicted that a Labor Department report will show Friday that employment increased in January by 195,000. But MarketWatch warned that the weather could lead to a report that doesn't match expectations.
 
The ISM survey showed that new orders declined to 51.2 from 64.4--the most dramatic one-month drop since 1980, with the lion's share of it occurring in materials and metals industries.
 
The inventory index also fell for the third consecutive month by 3 points to 44. The gap between new orders and inventories--a predictor of future manufacturing--dropped to a seven-month low of 7.2, down from 17.2 in December.
 
The export index dropped in January, a month in which it historically grows, according to Moody's. But analysts for the firm pointed out that a fall in imports means that trade could make a positive contribution to GDP growth in the first quarter.
 
Despite declines in almost all of the index's components--the lone exception being the prices paid index--analysts are optimistic that growth will expand at a faster pace soon. A three-month moving average of the measure finished last month at 55.2, above last year's average of 53.9. Measures greater than 50 also show the ISM survey indicating expansion. And Bradley Holcomb, the person in charge of the manufacturing index, pointed out, according to MarketWatch, that certain responses to the survey "reflect optimism and increasing volumes in the early stages of 2014."
 
To compile the index, the ISM surveys executives who order raw materials and other supplies for their companies. MarketWatch said that the gauge tends to mirror wider trends in the U.S. economy.

Consumer sentiment slumps into new year

 Permanent link
WASHINGTON (2/3/14)--The bad news is that the bad news is a little bit worse than expected. A consumer confidence index slipped just a bit more in January than was anticipated.

According to the University of Michigan's Consumer Sentiment Survey, consumer sentiment hit a final reading of 81.2, down from 82.5 in December, reflecting diminishing consumer optimism over their current financial situations and the overall outlook.

Harsh weather and a bad stock market climate may have to take a substantial bit of the blame for consumers losing heart (Thompson Reuters Jan. 31).  December saw both stock market declines and winter storms responsible for preventing the most people from getting to work recorded since the December 1977. Those reduced work hours could be cutting into paychecks and eroding financial confidence.

Another factor dimming a sunshiny outlook for some: the elimination of federal emergency unemployment benefits may where roughly 1.6 million people lost benefits between December and January.