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Economic Statistics for 30 Nov 11

Today’s economic statistical releases:

The Mortgage Bankers Association reports that mortgage applications were down by -11.7%, but the short Thanksgiving week clouds the significance of this week’s results. Delving deeper into the report shows new purchase applications were down -0.8% while refinance apps fell -15.3%.

The Challenger Job-Cut Report shows layoff announcements are fairly steady this month at 42,474 compared to 42,759 in October and 48,711 last year.

ADP, the country’s largest third-party payroll processor, estimates private payrolls rose 206,000 in November. We’ll see if Friday’s Employment Situation confirms that.

3Q productivity and costs were revised downward slightly, with productivity increasing at 2.3% annually, while labor costs fell -2.5%. This is pretty much in line with the GDP revision for 3Q.

The Chicago PMI indicates a pickup in business activity for the Chicago area, with the index rising to 62.6 from 58.4. This report is widely seen as a predictor of the national PMI, which will be released tomorrow.

The National Association of Realtors reports their pending home sales index rose to 93.3 from 84.5.

Dale Franks
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3 Responses to Economic Statistics for 30 Nov 11

  • The Fed took three actions this morning to support global financial markets: the first and by far most important was lowering the interest rate charged on its dollar liquidity swap lines with the ECB and other central banks from OIS+100bps to OIS+50bps, second it extended the availability of those facilities from August of 2012 to February of 2013, and third it has agreed with other central banks on creating swap lines whereby the Fed can lend foreign currencies to US financial institutions.

    Regarding the first of these moves, there had been a fair bit of speculation that the Fed would lower the interest rate charged on these lines, though the timing of such a move was uncertain. Throughout the crises there has been a relatively low hurdle for introducing or making more generous the swap lines, which may be due in part to the fact that such swap lines have historically been considered a normal part of the Fed’s toolbox. In addition, the Fed takes no credit risk with these swap lines, as it faces the ECB, not the private European banks that draw on these lines. So from a purely pecuniary view — which is what is not what is motivating the Fed — the reduction in the 50bps earned on the lines could be offset by an increase in the amount of risk-free lending done through the swap lines. (We are sometimes asked who is liable to the Fed if the eurozone were to disband. This is not specified in the swap agreements — which are posted on the NY Fed website — as seems appropriate given it is still a pretty far-fetched contingency. Presumably the national central banks that comprise the eurosystem would still be liable).


    Presumably would still be liable?
    What if they’re not?

    The ECB is currently being pressured to buy PIIGS bonds and thus monetize European sovereign debt. Germany opposes this as 1) they know they’ll be the ones on the hook for it should it go bad and 2) if it goes bad they know what hyper-inflation looks like. Turbo-tax Timmy wants the ECB to monetize the European debt because he did so here with the Fed buying US Treasuries.
    I’d somewhat worried that this is an end run around Germany and should it go bad the European debt contagion jumps the Atlantic putting US taxpayers on the hook.

    • @tkc If they are not liable, we take out the Force du Frappe and then we each get a European serving wench and driver for our homes for about 10 years.