Screw the pooch non-farm payroll numbers in the last hour, far worse than consensus. Even the increase in unemployment rate to 6.7%, better than expectations by a tenth of a percent, appears due to contraction of the labour pool.

(Graphic from Bureau of Labor Statistics release here)

More focus, if that is possible, is now fixed on housing and foreclosures. Factors that recently looked major positives for home owners- cheaper petrol and lower mortgage rates on the back of the Fed's plan to buy $600 billion of Government Sponsored Entity and mortgage backed security obligations - now look seriously mitigated by the scale of emerging job losses (although caveats on single data points apply).

Société Générale published a useful, pre-data release tour d'horizon and commentary on the problems of and choices for tacking foreclosures today (see especially page 2) - here is a small excerpt:

"There are two major problems that emerge from foreclosures. First, they continue to add to excess inventory, forcing even deeper cuts in housing starts and exerting further drag on the economy. Secondly, foreclosures have put significant pressure on home prices which compounds the problems for financial institutions.

There is a circular relationship between foreclosure rates and home price declines. A drop in prices not only reduces recovery rates on defaulted loans, but it also raises the incentive to default, further boosting foreclosure rates. One estimate quoted by Bernanke is that about 15% to 20% of all mortgage loans in the US are “under water”. That means that almost 1 out of every 5 mortgage holders has a fairly strong incentive to walk away."

And, crunched between the systemic financial problem and worsening macroeconomic outlook, this is what a small but key piece of that circular relationship looks like - pending urgently desired relief:

(data from the US Census Bureau release of 26 November)

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