You know those people that look at clouds and see shapes (no? oh, ok ...), well recently every time I see charts of the latest economic data, I see the Van Halen logo. And it's not even like I'm a Van Halen fan (I'm way too young, obviously). So to prove I am not one sandwich short of a picnic, here is the evidence - through exhibits 1 to 4 - to affirm my sanity.
EXHIBIT 1 - U.S. / EU GDP
Economic growth in two of the key regions of the world fell into the belly of the great recession back in late 2008 / early 2009, as highlighted so starkly below. But although we saw a subsequent bounce, economic growth in the U.S. is only back to showing tepid growth (expected at 2 - 3% this year), while the eurozone is experiencing a shallow slide back into recessionary terrain.
U.S. and EU GDP
EXHIBIT 2 - US INDUSTRIAL PRODUCTION
Industrial production in the U.S. mirrors this pattern, as a stark fall and rebound has now seen year-over-year growth for 27 consecutive months. That said, growth is at a tepid rate, below 5% for the past 12 months.
U.S. Industrial Production, YoY
EXHIBIT 3 - GLOBAL MANUFACTURING DATA
And these phenomena continue to be reflected across the globe, from the U.S. to Asia to Europe - that of a rebound back to mediocrely tepid expansion. (That is, except for the eurozone, which - like its economic growth - is back in contractionary conditions).
Global Manufacturing Data (>50 indicates expansion)
EXHIBIT 4 - US JOB CREATION
The fourth and final exhibit is perhaps the most worrisome, as it appears that job creation may be about to break its Van Halenesque-logopose™ to the downside. Again this chart paints a similar picture to the other exhibits, as job creation has been positive for the vast majority of the past two years after a dramatic descent into serious employment losses from early 2008 to early 2010.
But if we have seen the peak of job creation for this business cycle, we are to face rougher times ahead, as around 100,000 jobs need to be created each month just to keep up with population growth.
U.S. Jobs created / lost
As exhibits 1 - 4 serve to illustrate, I am not one egg short of an omelette. Economic data across the board are back to moving broadly sideways after the great recession and subsequent recovery. The greatest threat now, as highlighted by eurozone GDP and U.S. job creation, is that we are seeing signs of a slowdown once again.
With this in mind, flatlining with tepid growth seems a relatively attractive option. I leave you with some words of wisdom from one of Van Halen's most famous songs ... you've got to roll with the punches.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.