More Signs Recession Is Running Out of Steam

Get ready, this is one of those “green shoots” posts. There’s some fairly good data here that at least argues the recession is running out of steam.

First, on the jobs front, initial claims were up 3,000 to 608,000 but the more reliable four-week moving average fell by 7,000 to 615,700. Since April the four-week average is down by 40,000. Total unemployment fell by 148,000 to 6.76 million. (NYT)

Next, the Conference Board’s index of leading economic indicators was up 1.2% in May after an upward revision to 1.1% for April. When you start seeing positive revisions that’s generally a good sign. The May increase is the largest since a 1.4% increase in March 2004. (Reuters)

Finally, the Philly Fed survey of economic activity rose significantly from minus 22.6 in May to minus 2.2 in June. Both new orders and the employment gauge were at their highest levels since last September and November of last year respectively. To be sure, the reading still indicates contraction but just barely. (Reuters)

I know, I know a few data points do not a recovery make. But, these are fairly significant data points and taken with what we’ve seen over the last few months, it’s becoming pretty clear that there is a turn occurring. Whether that turns into a full blown recovery is very much up in the air. There is a lot that can go wrong and if you read this blog often, you know that I just see all of this as an upward leg on a recession (maybe something worse) that has multiple years to run.

But enjoy the good news while you can.

Comments

[Mad Hedge F...:]

Not so fast. Henry Blodget’s Clusterstock (www.businessinsider.co...) has this great service called the “Chart of the Day”, which occasionally sends out some real lulu’s. Take a look at the chart below, which illuminates the incredible decline in American home equity since 2007, plunging from 100% to 50% of GDP. We are rapidly approaching the 1965 level, and could reach a percentage not seen since the fifties this year. If you know any “green shoots” cheerleaders out there, you better e-mail them this chart. If Americans have just lost much of their largest asset, who is going to spend us out of this recession?

Jun 18 03:56 PM

[TradingHelp...:]

I am delighted to see I am not alone in posting "green shoots" articles. I have been voicing hope on SA for some weeks and am consistently getting the thumbs down for it. Admittedly I have not been to the US in recent months, but I have spent a considerable proportion of my time recently in Asia, the Middle East and the UK and I am seeing growing confidence, a willingness to do business and economic activity picking up rather sharpy from the Q1 trough. Whilst I appreciate there are still some tough hurdles to overcome, I have seen zero evidence that a global economic armageddon is nigh.

Jun 18 04:10 PM

[Trend Surfer:]

A few questions need to be asked:

1) Where are the funds coming from to spur these "green shoots"?
2) How much of the uptick is a temporary correction (upward within the larger decline)?

From a macroeconomic point of view, if not for government funds, within the context of deleveraging, the gun-shy US consumer saving more, large % decline in value of consumer's single largest asset (house), high unemployment, who is spending to provide the growth going forward?

I venture to say that a lot of these "green shoots" are temporary and seasonal bounces from an extreme low-level.

The longer-term technical view supports the larger macroeconomic view of a slow-economy going forward. The March 09' decline pierced through the low of the 2002 recession.

Jun 18 04:18 PM

[Dave Wrixon:]

That has to be the most screwed up metaphor I have seen in a while.

Jun 18 05:07 PM

[Tom Lindmark:]

LOL. It is a little weird isn't it? I just write, SA picks the headline.


On Jun 18 05:07 PM Dave Wrixon wrote:

> That has to be the most screwed up metaphor I have seen in a while.

Jun 18 05:15 PM

[whidbey:]

"Whether that turns into a full blown recovery is very much up in the air." ......................... modesty becomes you.

Did you look at the spendable incomes per household? How about earnings? Yes there is some nice twitchy, but your statement is correct. It is all up in the air. We will test the lows again when the fog clears.

Jun 18 06:02 PM

[conceptwizard:]

If anyone "Green shoots" 600,000 unemployed again that its a good thing I'll go postal. With these 600,000 numbers on a 4% monthly declne like its going, were looking at 12% posted unemployed by next year or 25% real unemployed. If this is the best green shoot there is there won;t be any thing in the garden this year.

Jun 18 08:43 PM

[Fighting Yoda:]

600K - little up or down is still a complete disaster. Trying to parse it especially with optimism is nonsense. It all feels like the bubble theories are being prpopounded - dot com and housing and stuff.

Jun 19 01:52 AM

[Roger Knights:]

"Total unemployment fell by 148,000 ..."

They're still unemployed, just not receiving unemployment compensation because after 26 weeks their eligibility ran out. See:

seekingalpha.com/artic...

seekingalpha.com/artic...

Jun 19 07:45 AM

[Quaker:]

Your analysis of the data is like something out of a high school paper.

New Claims are up 60% YOY. Continueing CLAIMS are down because benefits are running out. Name an industry hiring.

As to teh "leading indicators", take out the stock market advance and they're all negative. Every "advance" metric is still negative. Truck volume, trade volume, imports, exports, inventory build, mileage driven, truck milege driven, ultilty demand, capacity utilization, hotel vacancies, capex.

Most mall retailers are cutting stores and reducing capex. Companies are shifting health care budgets and cutting bonuses. Income tax revenues had record drops in April and May.

The ONLY thing going up are government statistics.

.

Jun 19 09:24 AM

[Bjarne Jensen:]

"Total unemployment fell by 148,000 to 6.76 million." is fully explained by people exhausting their benefits. See seekingalpha.com/artic... And all the rest of your green shoots are equally suspect.

Jun 19 11:10 AM

[suppose:]

Over 10% unemployed by end 2nd Q, over 12% end of 3rdQ, 14% by end of year. These numbers will be understated as usual by the Feds.

Businesses are scared and continue to cut employment.

Cash is king and shorts are licking their chops.

Everyone better save it while they still got it. Some Swiss francs in the old safety deposit box wouldn't hurt.

Jun 19 12:14 PM

[TradingHelp...:]

The US is not the whole global economy. At least half the US writers on SA talk about the US economy as if it is the only economy. China, India, Brazil, Australia... I can go on. There are 150 others.

Jun 19 03:59 PM