Green Shoots: Starting to Wither...Soon to Die

It was such a pleasant spring too… wet mild weather… just perfect for growing “real” crops … Bulls hoped their green would grow too… now though, it looks as if the “Green Shoots” may start to spontaneously shrivel… a casualty of the overarching climate of economic decline.

Things were looking so good too… You had the Philly Fed Business Outlook Survey make a strong showing… the Conference Board’s Index of Leading Economic Indicators seemed to signal recovery… although… these indicators all signaled recovery in 2001 as well… and look how far that “recovery” got us.

Another interesting report came out on Friday as well… the Regional and State Unemployment Report showing one state with over 14% unemployment (Michigan at 14.1% unemployment and increase of 1.2% since just last month) three states with over 12%, and 13 states over 10%.

Further, 27 states experienced a notable re-acceleration to unemployment jumping anywhere from .05% to 1.2% since just last month.

This brings us one step closer to the ultimate “Prime Bomb” detonation… the point at which the level of unemployment is BOTH uncomfortably high, causing systemic vicious cycling feedback effects (I would argue we are at that point now) AND obviously beyond a point at which the government can appear to have any form of control over.

Currently, the populace has almost innate or inherent confidence in the governing elite… they appear to have “fixed” the financial system and the stock market so why not the job market?

Yet, even with all the multi-trillion dollar government meddling, the job market is getting worse.

This is not a new trend…. We had a “jobless recovery” for the first half of this decade… followed by an historic decline (which destroyed all the jobs created in the jobless recovery leaving us now at payroll levels below that of early 2000… with over 20 million more work age population today) that continues to this day.

As more states push closer to the 15% unemployment level and the current crop of 12-14% unemployment states push on closer to 20%, there will be a point at which there is a clear realization that the “unemployment problem” (as they called it back in the 30s) is beyond the control of current government policy.

This will obviously bring new policies as well as a notable loss of confidence.

As I have pointed out in prior posts, mid-July is the next typical seasonal point for mass-layoff events so look for this recent unemployment re-acceleration to express itself through the summer and, if the economic climate of the second half is particularly weak, merge again with the larger typical mass-layoff period of mid January.

In the near term we should be focused on a significant change in outlook for the second half of 2009 as there is clear realization that the “Green Shoots” are dead and the decline will drag on much longer.

The following chart (click for super-dynamic zoom-able version) shows what has to be the starkest evidence that our economy has not only been weak for roughly a decade but further looks to be on course for a protracted bout of nationwide systemic double-digit unemployment.

Comments

[Free Mind]

This wasn't an occurrence of green shoots... This was "pink shoots", just as pink as the elephants some think they can see. :D

2009 Jun 23 05:55 AM

[peterthepainter]

good article...chimes with my own view...(I always like that)..

2009 Jun 23 06:36 AM

[User 357705]

Can anyone say suckers rally?

2009 Jun 23 06:49 AM

[markfl]

I see the greatest problem as a lack of a mechanism for job creation, short of 4%+ GDP during 2010 and 2011. That won't happen. GM, Chrysler, Circuit City, Bennigans, Steak and Ale, Starbucks, and numerous home builders will not be rehiring any people. We had the 2-year jobless recovery in 2002 and 1992, even with substantially lower undemployment and a much shallower recession. We have a situation that may seriously test the endurance of American society, and its being drastically underestimated. 10% undemployment represents real, societal, visceral pain.

2009 Jun 23 07:07 AM

[Moon Kil Woong]

What's that green line moving up on the chart? Is that what they mean by green shoots? LOL

2009 Jun 23 07:12 AM

[TradingHelpDesk]

Unemployment is a lagging indicator. So the economy can and will improve whilst unemployment levels remain at historically high levels.

2009 Jun 23 07:22 AM

[White Shield]

Green shoots. It reminds me of the old "trappers pit" - where you dig a hole big enough to trap the targeted prey, cover it with vegetation and wait for the inevitable.

The crater is waiting...covered with green shoots.

2009 Jun 23 07:31 AM

[User 357705]

Yeah, same thing as a suckers rally!


On Jun 23 07:31 AM White Shield wrote:

> Green shoots. It reminds me of the old "trappers pit" - where you
> dig a hole big enough to trap the targeted prey, cover it with vegetation
> and wait for the inevitable.
>
> The crater is waiting...covered with green shoots.

2009 Jun 23 07:43 AM

[conceptwizard]

Only in the sparsely populated states of Nebraska and Vermont did the unemployment rate hold steady. The agricultural states of Nebraska and nearby North Dakota share the lowest unemployment rate, both at 4.4 percent. This may reverse itself as the decline in agricultural commodity prices ripples through the plains states' economies.

The fall-off was most pronounced in the states that have been hardest hit by the collapse in real estate and manufacturing. In Arizona, first quarter personal income tax revenue fell by 55 percent from the previous year; in South Carolina the decline was 38.6 percent; in Michigan, 34.4 percent. California, which is already teetering on the brink of bankruptcy, saw a decline of 33.8 percent in personal income tax receipts. The data bodes ill for the largest US state, which collects nearly half of its state revenues from income taxes, one of the highest proportions in the nation.

As always, the official rate belies the true scope of unemployment by removing from the workforce count a large number of workers who are inactive or “discouraged” in seeking work, and by counting as employed those who are only able to get part-time hours. While state-by-state statistics for this expanded definition of unemployment are not available, it is very likely that the real unemployment rate in Michigan is now approaching 25 percent, and that in a number of states, including California, it is around 20 percent. On a national level, this broader rate of unemployment and underemployment stood at 16.4 percent in May. These are near-depression-level figures.

2009 Jun 23 08:05 AM

[surferdoc]

I agree that we have a long way to go but we are not going to revisit the lows.The downside was panic and way overdone as usually is. I think a fair value for the S and P is the 800- 830.Most companies are profitable. A small amount of companies 15% lost 90% of the money bring down the S and P profits.You have to be carefully and pick companies that will survive and in 5 years and then you will be smiling

2009 Jun 23 08:37 AM

[capital pains]

"Green shoots" is a term promulgated by the useless talking heads at CNBC, most especially Larry Kudlow. The guests appearing every five minutes on CNBC are nothing more than pumpers. Useless in their prognostications. As useless and dangerous as Cramer and the Fast Money Monkeys crowd.
Those of us out here in the real world fully recognize the fact that there are no green shoots to be seen anywhere. In spite of the phoney "less worse" euphoria that drives every ephemeral market move upward the facts are plain. Everywhere you look, be it unemployment, loan defaults, CRE, housing, welfare rolls, states deficits, corporate profits, on and on, there is nothing indicating a healthy recovery. We are in the abyss. And, we don't need ridiculous market mavens trying to convince us otherwise. The emperor has no clothes.

2009 Jun 23 08:46 AM

[User 357705]

Thanks for the income tax revenue data. In the same time frame as you quote AZ data at -55% where I am the figure was -7.4% and revenues from VAT were -18.7%. That includes a 45% drop in exports y-o-y as well. We're hurting but not as bad as US is.

It would be interesting to see how the least populous state of WY fared but they don't have personal income tax. One wonders if there is a significant move either way in unemployment with the bulk of their economy being in oil, gas and coal.


On Jun 23 08:05 AM conceptwizard wrote:

> Only in the sparsely populated states of Nebraska and Vermont did
> the unemployment rate hold steady. The agricultural states of Nebraska
> and nearby North Dakota share the lowest unemployment rate, both
> at 4.4 percent. This may reverse itself as the decline in agricultural
> commodity prices ripples through the plains states' economies. <br/>
>
> The fall-off was most pronounced in the states that have been hardest
> hit by the collapse in real estate and manufacturing. In Arizona,
> first quarter personal income tax revenue fell by 55 percent from
> the previous year; in South Carolina the decline was 38.6 percent;
> in Michigan, 34.4 percent. California, which is already teetering
> on the brink of bankruptcy, saw a decline of 33.8 percent in personal
> income tax receipts. The data bodes ill for the largest US state,
> which collects nearly half of its state revenues from income taxes,
> one of the highest proportions in the nation.
>
> As always, the official rate belies the true scope of unemployment
> by removing from the workforce count a large number of workers who
> are inactive or “discouraged” in seeking work, and by counting as
> employed those who are only able to get part-time hours. While state-by-state
> statistics for this expanded definition of unemployment are not available,
> it is very likely that the real unemployment rate in Michigan is
> now approaching 25 percent, and that in a number of states, including
> California, it is around 20 percent. On a national level, this broader
> rate of unemployment and underemployment stood at 16.4 percent in
> May. These are near-depression-level figures.

2009 Jun 23 08:46 AM

[robert.b.ferguson]

The only green shoots that really existed were coming out of the piles of excrement dischrged from pundits in D.C. and on CNBC.

2009 Jun 23 09:40 AM

[Roger Knights]

""Green shoots" is a term promulgated by the useless talking heads at CNBC, most especially Larry Kudlow. The guests appearing every five minutes on CNBC are nothing more than pumpers."

I hereby dub them "bull-shooters"--a neologism I wish I'd thought of a month ago. it's catchy, or ought to be, so I encourage other bears to employ it.

2009 Jun 23 09:43 AM

[Roger Knights]

"As useless and dangerous as Cramer and the Fast Money Monkeys crowd."

Look at it this way: They DO give us our monkey's worth.

2009 Jun 23 09:52 AM

[robert.b.ferguson]

How much fun is a barrel of Cramers... ER... Monkeys really?


On Jun 23 09:52 AM Roger Knights wrote:

> "As useless and dangerous as Cramer and the Fast Money Monkeys crowd."
>
>
> Look at it this way: They DO give us our monkey's worth.

2009 Jun 23 10:00 AM

[markfl]

These comments are accurate and bear careful attention. One routinely hears about unemployment in the 1930's at 20%+ but I've never really heard told how these values were estimated. The data you refer to, as I'm sure you know, are commonly called U6 unemployment, and are based upon the household survey and not actual benefit claims. If you count all of the people who would take a full-time job (if they could get it--but can't), there's every reason to think some states will hit that 20% UNDERemployment figure. Calling it a depression, even if only state by state, is not hyperbole.

On Jun 23 08:05 AM conceptwizard wrote:

> Only in the sparsely populated states of Nebraska and Vermont did
> the unemployment rate hold steady. The agricultural states of Nebraska
> and nearby North Dakota share the lowest unemployment rate, both
> at 4.4 percent. This may reverse itself as the decline in agricultural
> commodity prices ripples through the plains states' economies. <br/>
>
> The fall-off was most pronounced in the states that have been hardest
> hit by the collapse in real estate and manufacturing. In Arizona,
> first quarter personal income tax revenue fell by 55 percent from
> the previous year; in South Carolina the decline was 38.6 percent;
> in Michigan, 34.4 percent. California, which is already teetering
> on the brink of bankruptcy, saw a decline of 33.8 percent in personal
> income tax receipts. The data bodes ill for the largest US state,
> which collects nearly half of its state revenues from income taxes,
> one of the highest proportions in the nation.
>
> As always, the official rate belies the true scope of unemployment
> by removing from the workforce count a large number of workers who
> are inactive or “discouraged” in seeking work, and by counting as
> employed those who are only able to get part-time hours. While state-by-state
> statistics for this expanded definition of unemployment are not available,
> it is very likely that the real unemployment rate in Michigan is
> now approaching 25 percent, and that in a number of states, including
> California, it is around 20 percent. On a national level, this broader
> rate of unemployment and underemployment stood at 16.4 percent in
> May. These are near-depression-level figures.

2009 Jun 23 10:03 AM

[speeddaimon]

Odd, I thought these numbers were non-FARM payrolls. Thus, the jobs in my dinky little state most likely are not Ag related. Hmm, I wonder if it might be from construction (nebraska is home to the 3rd largest construction company in the US, telecom/telemarketing, insurance, or technology). Drop the stereotypical B/S before making some crap blanket statement.


On Jun 23 08:05 AM conceptwizard wrote:

> Only in the sparsely populated states of Nebraska and Vermont did
> the unemployment rate hold steady. The agricultural states of Nebraska
> and nearby North Dakota share the lowest unemployment rate, both
> at 4.4 percent. This may reverse itself as the decline in agricultural
> commodity prices ripples through the plains states' economies. <br/>
>
> The fall-off was most pronounced in the states that have been hardest
> hit by the collapse in real estate and manufacturing. In Arizona,
> first quarter personal income tax revenue fell by 55 percent from
> the previous year; in South Carolina the decline was 38.6 percent;
> in Michigan, 34.4 percent. California, which is already teetering
> on the brink of bankruptcy, saw a decline of 33.8 percent in personal
> income tax receipts. The data bodes ill for the largest US state,
> which collects nearly half of its state revenues from income taxes,
> one of the highest proportions in the nation.
>
> As always, the official rate belies the true scope of unemployment
> by removing from the workforce count a large number of workers who
> are inactive or “discouraged” in seeking work, and by counting as
> employed those who are only able to get part-time hours. While state-by-state
> statistics for this expanded definition of unemployment are not available,
> it is very likely that the real unemployment rate in Michigan is
> now approaching 25 percent, and that in a number of states, including
> California, it is around 20 percent. On a national level, this broader
> rate of unemployment and underemployment stood at 16.4 percent in
> May. These are near-depression-level figures.

2009 Jun 23 10:15 AM

[Mad Hedge Fund Trader]

Die, monster, die. If you had any doubt, take a look at the insider selling figures for April and May. Corporate selling of stock has soared from $10 billion in April to $63 billion in May. Insider selling jumped from $1.9 billion to $2.2 billion, an enormous amount. Who were the suckers? Inflows to mutual funds and ETF’s ballooned from $7.0 billion to $10.3 billion. Retail investors are always the ones who ring the bell at the top of a move. That explains why dozens of technical indicators are rolling over. They’re are not signaling a crash, but they are not saying we are going up any time soon, either. If for whatever reason you can’t get out, sell short dated calls against all of your positions.

2009 Jun 23 10:22 AM

[ain't no fortunate son]

I live in VT 5 months out of the year, and FL the other 7 months - talk about a study in contrasts, altho even up here in VT the real estate market is still weakening as "big" supply (big for VT anyway) comes on line, and jobs just stagnate. In the Mad River Valley where I live there has been a small spike in new home building, but supply of existing homes and especially condos is up huge (about 25 condos on the market last year, 120+ this year).

If I were a betting man (and I am) I would put my money on FL as to where we are going... what I saw before I left in early May was more of the same pain. Lots of muni bonds are going to default IMHO, because there are a lot fewer homeowners paying property and sales taxes vs a huge supply of brand new and mostly empty schools, malls and municipal buildings.

Its interesting that FINALLY people are figuring out maybe CRE ain't that stable a market after all... tick tick tick.


On Jun 23 08:05 AM conceptwizard wrote:

> Only in the sparsely populated states of Nebraska and Vermont did
> the unemployment rate hold steady. The agricultural states of Nebraska
> and nearby North Dakota share the lowest unemployment rate, both
> at 4.4 percent. This may reverse itself as the decline in agricultural
> commodity prices ripples through the plains states' economies. <br/>
>
> The fall-off was most pronounced in the states that have been hardest
> hit by the collapse in real estate and manufacturing. In Arizona,
> first quarter personal income tax revenue fell by 55 percent from
> the previous year; in South Carolina the decline was 38.6 percent;
> in Michigan, 34.4 percent. California, which is already teetering
> on the brink of bankruptcy, saw a decline of 33.8 percent in personal
> income tax receipts. The data bodes ill for the largest US state,
> which collects nearly half of its state revenues from income taxes,
> one of the highest proportions in the nation.
>
> As always, the official rate belies the true scope of unemployment
> by removing from the workforce count a large number of workers who
> are inactive or “discouraged” in seeking work, and by counting as
> employed those who are only able to get part-time hours. While state-by-state
> statistics for this expanded definition of unemployment are not available,
> it is very likely that the real unemployment rate in Michigan is
> now approaching 25 percent, and that in a number of states, including
> California, it is around 20 percent. On a national level, this broader
> rate of unemployment and underemployment stood at 16.4 percent in
> May. These are near-depression-level figures.

2009 Jun 23 10:36 AM