2 More Green Shoots Suggest Economic Recovery

This chart is another of those undeniable green shoots. The chart tracks the number of corporate layoff announcements, and they have plunged from a high of 242K in January to 74K last month. That's a drop of almost 70%! Indeed, they are essentially back to levels that prevailed during the the growth years of 2004-2007. Corporate America saw the problem in late 2008, took action, and has now largely completed its downsizing. Businesses are now leaner and meaner and ready to grow. This is a tremendous development that suggests the economy is now in recovery mode.

The purchasing manager's index of manufacturing activity has improved dramatically this year. As this chart suggests, it is now very close to the level which is consistent with a flat economy (i.e., the recession is all but over). Another undeniable green shoot. The prices paid index has risen to 50 (which means half of those reporting are seeing rising prices and half are seeing falling prices), and I think that reflects not only the widespread rise in commodity prices, but also the fact that conditions are not so weak that they are leading to destructive or widespread price-cutting. When the prices paid index rises to 50 that has typically signalled an economy in recovery mode.

Comments

[Peter Cooper:]

Hogwash, here we are in the second half of 2009 and there is no sign of a recovery - see:
arabianmoney.net/2009/.../

Jul 02 08:40 AM

[Fighting Yoda:]

467K job losses, 9.5% unemployment - is not green shoots. Since green shoots PR became the mantra in March - we have already lost about 2 Mi jobs, with lot more to come - no green shoots -just lots and lots of weeds, and lots of foolish investors.

Jul 02 09:28 AM

[ciel:]

Calfi,

Mass layoffs are only conducted by companies large enough to do so. Large companies always have their greatest layoffs in the 4th and 1st quarters, their fewest in the 2cd. Therefore, Challenger, Gray & Christmas track mass layoffs specifically at guess where...

Also,

Even a cursory look at the ISM shows that as some proxy for GDP, it has *over-implied* strength of GDP during 1993 through 95, 1999-2001, and 2003-2008. That covers about 9 out of the 19 years in the graph above. If you are going to flaunt it around as some kind of proxy, you should therefore include the disclaimer that it has a high to very high bias over actual GDP 47% of the time.

Jul 02 09:37 AM

[User 353732:]

It must be serenely satisfying to live in a mindspace where net monthly job losses exceed 400,000; middle class families face increasing finncial anxieties; real estate prices keep falling; real disposable income for all but the most fortunate keeps compressing; scores of thousands of small busineeses go under gfrom lack of credit; international trade steadily declines and dozens of municipalities tip into technical bankruptcy and still find compelling evidence that things are getting better every day.

When facts are dismissed and truth is denied , then reality becomes fantasy. If one ignores all news that is bad, then by definition the remaining news must be neutral or good.
This is liking telling someone with a debilitating and serious heart disease that the asprin has made his headache go away: proof that good health is being restored.

Jul 02 10:15 AM

[logicalthought:]

You have been living in dreamland ever since you started posting on Seeking Alpha. My crystal ball says that you will wind up working as a Calafia Beach lifeguard.

Jul 02 10:33 AM

[Mad Hedge F...:]

Shoot those "green shoots ".Ouch! The non-farm payroll came in at minus 467,000. What a spanking! The monthly figure is 100,000 worse than the expectations of most economists, and took the unemployment rate up to 9.5%. There are now 14.5 million unemployed, an all time high, 20 million underemployed, and who knows how many more who have taken pay cuts, unpaid vacations, and furloughs. Commodities got slammed across the board, stocks got trashed, and for a minute I thought they were going to run out of red arrows. Traders shorting the long bond got stopped out of their positions yet again. Looking at the data, it is clear that this is the worst case scenario. Even construction and government jobs, the beneficiaries of so much Federal largess, are still falling. Only employment in education and health care is still rising. This comes on top of yesterday’s disastrous figures showing sales at Chrysler fell 42%, Toyota (TM) 34.6%, General Motors (GMGMQ) 33.6%, and Honda (HMC) 29.5%. At least this will put that annoying “green shoots” crowd out to pasture. The Obama crowd has to be sweating bullets now, having fired their best shot at the enemy, with no apparent impact. Here comes the “L”. Please see my “Sell in May and Go Away” report at Ouch! The non-farm payroll came in at minus 467,000. What a spanking! The monthly figure is 100,000 worse than the expectations of most economists, and took the unemployment rate up to 9.5%. There are now 14.5 million unemployed, an all time high, 20 million underemployed, and who knows how many more who have taken pay cuts, unpaid vacations, and furloughs. Commodities got slammed across the board, stocks got trashed, and for a minute I thought they were going to run out of red arrows. Traders shorting the long bond got stopped out of their positions yet again. Looking at the data, it is clear that this is the worst case scenario. Even construction and government jobs, the beneficiaries of so much Federal largess, are still falling. Only employment in education and health care is still rising. This comes on top of yesterday’s disastrous figures showing sales at Chrysler fell 42%, Toyota (TM) 34.6%, General Motors (GMGMQ) 33.6%, and Honda (HMC) 29.5%. At least this will put that annoying “green shoots” crowd out to pasture. The Obama crowd has to be sweating bullets now, having fired their best shot at the enemy, with no apparent impact. Here comes the “L”. Please see my “Sell in May and Go Away” report at www.madhedgefundtrader.... .

Jul 02 11:20 AM

[logicalman:]

wow...you sh'd have known that writing anything slightly bullish would have the permabears at your throat....to user 353732,could it be that you are ignoring all news that is good??? i stated a while back when s&p was 440-450 that we could see a 5 to 10% correction anytime, and i suggested that this level, 900 to 850 would be another great opportunity to buy..i haven't changed my mind!!!

Jul 02 12:16 PM

[logicalman:]

june 2 means we are 1 day into the second half...the second half still has approx. 120 days left in it..i would'nt even dream what can happen in this second half..but i do know that there will be some great opportunities to profit no matter where the mkts. go..keep an open mind, don't get caught up by giving reasons that everybody and his barber knows, look beyond the hype on both sides of the debate..with this and a normal iq. you will do very well!!!


On Jul 02 08:40 AM Peter Cooper wrote:

> Hogwash, here we are in the second half of 2009 and there is no sign
> of a recovery - see:
> arabianmoney.net/2009/.../

Jul 02 12:35 PM

[econjunkie:]

logicalman:

S&P 440-450? This year? 120 days left in the second half? This year?

Jul 02 01:58 PM

[Old Trader:]

logicalman,

Ignoring "all the news that is good" is pretty darn easy, when there's so damn little of it!


On Jul 02 12:16 PM logicalman wrote:

> wow...you sh'd have known that writing anything slightly bullish
> would have the permabears at your throat....to user 353732,could
> it be that you are ignoring all news that is good??? i stated a while
> back when s&p was 440-450 that we could see a 5 to 10% correction
> anytime, and i suggested that this level, 900 to 850 would be another
> great opportunity to buy..i haven't changed my mind!!!

Jul 03 02:11 PM