Economy Watch: Non-Official March Jobs Numbers Not Bad

Public-sector jobs took a big hit, but private-sector cuts weren't bad; the shadow inventory of U.S. homes is slightly less huge; and the Fed is looking for a high bidder for subprime MBS bonds.

By Dees Stribling, Contributing Editor

As usual, ahead of the official jobs report, which will be released Friday, the unofficial jobs report duo of Challenger, Gray & Christmas and ADP were out on Wednesday (a duo only in timing, since the two companies aren’t affiliated). On the whole, the two reports were generally positive, with some exceptions.

According to the Challenger report, the private sector isn’t laying off as many workers as it once was–only about 130,700 job cuts during 1Q11, compared with about 181,100 during the first quarter of 2010. That’s the lowest quarterly rate of private-sector downsizing since the mid-1990s. On the other hand, state and local governments, as well as nonprofits, cut over 19,000 jobs during March, or 46 percent of all layoffs for the month, which is the highest monthly layoff total for that sector since March 2010.

The ADP National Employment Report reports that private-sector employers added 201,000 jobs in March. Small businesses led the charge by hiring 102,000 employees, while large businesses remained timid, hiring only 17,000 (medium-sized biz hired the rest). The ADP report does not, however, cover the public sector, and is sometimes at odds with the U.S. Department of Commerce report that immediately follows it.

Shadow inventory of homes down, but still large

CoreLogic reported on Wednesday that the shadow inventory in the U.S. housing market was 1.8 million properties at the end of January. That represents a decrease compared with January 2010, when the shadow inventory was 2 million, but it can hardly be called good news, since the current number represents about nine months’ supply of such properties, according to the company, and a continuing drag on home prices.

The highest levels of distressed months’ supply–which is the ratio of the number of properties that are 90 days or more delinquent to the number of home sales–are in New Jersey, Illinois and Maryland, says CoreLogic. Those states are experiencing a combination of higher-than-average 90-plus-day delinquencies and lower sales activity. The states with the lowest distressed months’ supply are North Dakota, Alaska and Wyoming, while the largest state with the lowest level of distressed months’ supply was Texas.

Even 1.8 million doesn’t quite encompass all the homes that might come onto the market at a discount in the not-too-distant future. CoreLogic’s definition of shadow inventory counts properties past 90 days late on their mortgage, already in foreclosure, or REO but not listed for sale yet. It doesn’t include properties that are badly underwater, if the mortgage-holders are still making payments. The company estimates that 2 million more properties are more than 50 percent underwater–valuations less than half that of the outstanding mortgages–and that foreclosure will probably arrive at their doors like so many wolves.

Fed to sell subprime MBS on open market

Ending some months of speculation, the Federal Reserve said on Wednesday that it’s going to sell some of the subprime and Atl-A MBS that it picked up from American International Group, once upon a panic. AIG offered to buy the formerly toxic bonds back for $15.7 billion recently, but the Fed has now officially said no.

Instead, the central bank is headed to market to see who will pay more than AIG, citing a “high level of interest by investors.” It will put the MBS up for sale using a bid list, which will allow buyers to make bids. The Fed stressed, however, that the process will be “gradual.”

Wall Street was in another what-me-worry mood on Wednesday, with the Dow Jones Industrial Average gaining 71.6 points, or 0.58 percent. The S&P 500 was up 0.67 percent, and the Nasdaq rose 0.72 percent.

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