U.S. Recovery Firing on Multiple Cylinders

by: The Good News Economist

Many reports out on Wednesday point to a U.S. recovery that is exhibiting healthy signs on many different fronts.

Motor vehicle sales are now enjoying a strong run. U.S.-made vehicle sales held unchanged in November at a 9.1 million unit annual rate. The results surprised many recovery skeptics who were calling for a fizzle in November. Anecdotal reports on used car sales point to strength as do indications on sales at auto-parts retail chains. Motor vehicle sales make up 18 percent of total retail sales.

Private-sector employment increased by +93,000 from October to November on a seasonally adjusted basis, according to the latest ADP National Employment Report released Wednesday. The best news in the report shows that small businesses (the heart of job producers) actually accounted for more than half of the net additions. (+54,000) The report bodes well for the government's report released later this week which will also include government job additions. Some analysts now believe net additions in November may have reached close to +200,000 jobs for the month.

Manufacturing continues to grow at a healthy pace, according to the ISM report for November. The growth has now been persistent for 16 straight months with the sector now adding jobs for 12 straight months.

Construction spending surprisingly jumped in October, rising 0.7 percent, following a 0.7 percent rebound the month before. The market expectation was for a 0.4 percent decrease. Strength was in multifamily housing. (Also a surprise to many.)

The Beige Book prepared for the December 14 Fed meeting gave the economy a modest upgrade.
Quotes included:

  • Manufacturing activity continued to expand in almost all Districts, with relatively strong growth seen in metal fabrication and the automotive industries. Reports also showed steady to increasing activity for professional and nonfinancial services.
  • Retail spending showed improvement across most Districts.
  • Lending activity is picking up somewhat for businesses in most Districts.
  • Hiring activity showed some improvement across most Districts.
  • Inflation remains subdued.

The Economic Cycle Research Institute, ECRI, a New York-based independent forecasting group, upgraded their projection for future economic growth. Earlier in the week, ECRI's managing director and cofounder, Lakshman Achuthan, was on CNBC Monday to discuss the enhancement of their Oct 28, 2010 prediction. Last month the Institute declared that "The much-feared double-dip recession is not going to happen". This month they go several steps further to say:

  • There will be a revival of US Economic growth in the near future.
  • When you are at this stage of the [recovery] cycle, a shock won't derail us and put us into a new recession.
  • In October they said "no second recession." Now they are saying economic growth is likely to accelerate to a 3-4% annualized rate.

Achuthan went on to indicate that although we are a long way off from recovering the 8.5M jobs lost in the recession, the economy has now added back 1M and we are on track for to begin to see significant job gains again.