The graphs below show the number of people on the live register. We are currently at a level similar to 1999.Expectations are for another significant change this month. The majority of these jobs would appear to be from the construction industry and you can see the changes in the graphs as construction levels rose in the late 90's to present day, unemployment decreased.
Note: no adjustments have been made for population increases or an increase in foreign labour.
The latest update on the Live Register is due on Friday.
The graph below is from 2006 to 2008. To try your own go here.
This short piece provides an interesting & scary comparison between the sub-prime & Alt-A levels of lending and default. The information has been obtained from the New York Fed and is pretty easy to follow.
The basics are that there is more lending in the Alt-A market for higher amounts a lot of which is for non owner-occupied housing. The lending ratio is up around the 90% mark and defaults are already at 14% which is similar to that of the sub-prime area last year.The credit rating difference between these two isn't that great. The majority of these loan applicants were based on stated income or "liar loans". And, finally, the majority of mortgage resets on the Alt-A's are set to kick in over the next two years.
There are strong comparisons that can be made between America & Ireland. We also had 100% lending (and more). Lax lending standards. The "rent a room" to supplement/increase the mortgage. Interest only loans; when people finally see the real level of repayments they have to make what will happen? Negative equity is beginning to kick in for those who have purchased in recent times on a high loan to value rate.
In America, it's easier to file for bankruptcy, hand back the keys and walk away. It's not so easy in Ireland, but that's not to say it won't happen. What about construction workers who can't afford their mortgages due to lack of work. What's to stop them from picking up tools, moving to Oz where there's a demand for their labour and leaving their Irish mortgage troubles behind them?
First, a brief note of explanation. The concept of super-senior debt was essentially invented by creative bankers about four years ago to refer to the chunk of debt that sits at the very top of the capital structure of a collateralised debt obligation. It is the bit that gets paid off first, before other investors, if the CDO ever defaults. In theory, it makes this debt super-safe; indeed, so secure that rating agencies have been happy to give super-senior CDO debt a AAA tag, irrespective of what lay inside the CDO.
The next stage in the US mortgage crisis is starting to raise its head.
First of all, we have the 80/20 mortgages. In short, this is a form of 100% financing of which 80% is with the prime lender and 20% is with the second lender at a higher interest rate. These are not subprime, they can be for the Alt-A(good credit rating)and better mortgages allowing people to lend with 0% finance. The problem arises when houses are sold at a loss or foreclosed as the prime lender has first claim on the amounts owed. Write downs for this sector have yet to take place.
Then comes the Home Equity Line of Credit (HELOC). This is where people have released equity in their houses to fund their lifestyle. It has been a big factor in the excess spending in the US. Again, when houses are sold at a loss or foreclosed, there's a big problem for these lenders. Being the third in line to 80/20, there is the potential that these lenders could see a return of zero.
Americans owe a staggering $1.1 trillion on home equity loans and in December 2007, 5.7% of home equity lines of credit were delinquent or in default. What if this number was to rise to 10% in a recession? That's another $110,000,000,000 to write down.
With the 80/20 (and low interest rates), we saw the basic idea of saving & investing to purchase a house go out the window. People were encouraged to spend rather than save as they could always release equity, with the HELOC, in their rapidly appreciating home to spend more or meet debt payments when needed. This involved fictitious capital being injected into the economy at huge rates. As the various Central Banks tried to correct excessive spending by raising rates, delinquencies and foreclosures rose thus causing the banks to tighten lending procedures and incur write downs. There are further write downs to come and we won't see the end of this until the reset button is pushed and everything is marked to market.
