Brian Westbury: Positive on Recovery for Good Reason

Back in early May we reported on how Brian Westbury was calling an end to the recession. At that time we thought the recession was more likely to end around July. On Monday, Brian wrote a market update that confirms his view that in spite of the weak June jobs report that the recovery was still on track.

Several metrics reported below in fact typically only take place when the economy is recovering while the jobs report can continue to sputter. And when jobs do sputter it's likely because corporations are reaping huge profits from less employee expenses and higher productivity.

• The overall ISM Manufacturing index hit 44.8 in June while the production index hit 52.5.The economy is almost always growing when these indexes are at those levels.

• The four-week moving average for initial claims for unemployment insurance isdown 43,500 (or 7.1%), in the past 2½ months, again something that almost never happens unless the economy is expanding.

• In addition, personal consumption, new orders for durable goods, home sales, and single-family housing starts are all off the lows of earlier this year.

• Our forecast right now is that real GDP shrank at a 2.5% annual rate in the second quarter, with all of the decline attributable to inventory reductions.

• Profits should accelerate sharply in Q2 because hours worked fell at a 7.9% annual rate. This means productivity growth (output per hour) must have soared. In fact, this helps explain why jobs growth has not turned yet –a technology boom is still boosting how much production companies can get from each hour worked.

So why all the fear about the economy and profits??? The market is now at a point of rolling over. Guess it really depends on profits. Good numbers and the market rallies to yearly highs. Bad numbers and the market rolls over.

Comments

[ain't no fo...:]

I didn't realize Brian had ever accepted the concept that we were even in a recession in the first place... all I heard from him last year before I put him on permanent mute was the Goldilocks sugarplum fairy theory that the US economy would avoid recession.

Give me a break.

Jul 08 09:08 AM

[Larry House:]

I wish I could agree with Brian, but I just can't. Too many things have gone wrong and still may to call an end to the recession. If the recession is over here, we are in a flatline pattern that will not be good for stocks. Even if stocks hold their ground here, where is upside to come from. If Brian thinks not only is the recession over, but we are also going to begin fairly good growth, then I totally disagree.

Jul 08 02:42 PM

[Stone Fox C...:]

LOL... Very good point. Brian was in big time denial last year, but I think he has very valid points this time. The numbers suggest that the recession is over though the govt could also cause a double dip with policy changes.


On Jul 08 09:08 AM wpdragon wrote:

> I didn't realize Brian had ever accepted the concept that we were
> even in a recession in the first place... all I heard from him last
> year before I put him on permanent mute was the Goldilocks sugarplum
> fairy theory that the US economy would avoid recession.
>
> Give me a break.

Jul 08 03:53 PM

[ain't no fo...:]

Denial? Well, that's one word for it I suppose, but with the data he must've had available to him, data that wasn't available to the tens of millions of middle class Americans who have been utterly destroyed by the Wall Street denial machine, I'm amazed that he came to the conclusion we weren't in a recession. I mean, even a stiff like me doing a couple of hours a day reading could figure out there wasn't a single financial institution on the planet that knew what its balance sheet really looked like, and that would have terrible implications for the economies of the world.

But I'm not gonna get into a big dialogue about it. Suffice to say a LOT of pundits and sell-side guys "apparently" got it wrong last year... but I don't think it was a coincidence.

Fool me once as they say...


On Jul 08 03:53 PM Stone Fox Capital wrote:

> LOL... Very good point. Brian was in big time denial last year, but
> I think he has very valid points this time. The numbers suggest that
> the recession is over though the govt could also cause a double dip
> with policy changes.

Jul 08 04:20 PM

[Voice of co...:]

wesbury would make a good sidekick for cramer. they are both idiots.

Jul 08 04:35 PM

[damienhaas:]

I think Brian is still in denial. Actually what number suggest the recession is over? The number just show the economy contraction is slower and not yet hit the floor yet.

On Jul 08 03:53 PM Stone Fox Capital wrote:

> LOL... Very good point. Brian was in big time denial last year, but
> I think he has very valid points this time. The numbers suggest that
> the recession is over though the govt could also cause a double dip
> with policy changes.

Jul 08 08:39 PM

[Stone Fox C...:]

Did you read the article? It has several numbers from June that suggest the recession is over. More likely though we'll see numbers in July like the initial jobless claims that confirm the end.

Jul 09 01:56 PM