Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.
-
Instablogged Stocks
Stocks that instabloggers have most recently written about -
Latest Instablog Posts
-
1
Divergence Between The S&P 500 And Current E...
-
2
The Trend Is Your Friend
-
3
Skyworks Solutions: An Intriguing Investment...
-
4
Mr. Jin CEO Of JA Solar
-
5
Downside Protection For Cisco Systems
-
1
-
Top Instablogs
See all Top Instablogs »
Should We Take ECRI's Recession Call Seriously? 7 comments
We reported this past week on ECRI's assertion that the recession began in July 2012. I have discussed it in my weekly summary post, but I have never expressed an opinion concerning the validity of ECRI's call.
Most of my compatriots have written off ECRI's recession call for a variety of valid reasons - most of which revolve around their own forecasting tools which are giving a different answer. We at Econintersect also have our forecasting tools - but I am open to exploring the possibility that we are in a new recession.
Consider that this is not 2007 with massive economic imbalances. This is 2012, with:
This may be the perfect storm part II - HOWEVER there are few imbalances except those which have not cleared yet from the last recession. So my question is more delicate - would we even feel like we were in a recession? My position continues to be that the new normal may be giving the wrong answer to traditional forecasting tools - including ECRI's.
So in the new normal, do not discount anything - but believe nothing.
The Econintersect economic forecast for December 2012 shows weak growth. The underlying dynamics continue to have a downward bent. There are recession markers still in play, and one of our alternate methods to validate our forecast is recessionary. All in all, not a great forecast - but not one which would cause you to jump out the nearest window either.
ECRI believes the recession began in July 2012. ECRI first stated in September 2011 a recession was coming . The size and depth is unknown. The ECRI WLI growth index value is enjoying its thirteenth week in positive territory (but at a ten week low this week). The index is indicating the economy six month from today will be slightly better than it is today.
Current ECRI WLI Growth Index/images/z weekly_indexes.PNG
Initial unemployment claims fell again from 410,000 (reported last week) to 393,000 this week. No Hurricane Sandy effect in this week's data. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate (background here and here).
The real gauge - the 4 week moving average - rose significantly from 396,250 (reported last week) to 405,250. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge. This is the highest 4 week average in over one year, and is up 3.3% year-over-year.
Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2010 (blue line), 2011 (red line), 2012 (green line)(click to enlarge)
/images/z unemployment.PNG
Bankruptcies this Week: Dewey & LeBoeuf, Safeguard Security Holdings
Data released this week which contained economically intuitive components (forward looking) were:
All other data released this week either does not have enough historical correlation to the economy to be considered intuitive, or is simply a coincident indicator to the economy.
Weekly Economic Release Scorecard:Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.
Share this Instablog
This post has 7 comments:
ECRI's point is that everything except employment peaked in july and is now falling. http://bit.ly/qRZPQy#
and ECRI argues that a significant fraction of past recessions had employment growing for several months into the recession (also true)
If ECRI is correct, we should see a downside surprise on employment in the next few months.
a forecasting tool we use for forecasting employment is at the same levels (and downtrending) when the USA entered the great recession.
in 4Q2012, there will be a significant headwind from inventory depletion - and my bet is there will be a slight reduction in consumption based on trend lines. this would be more than enough to put the USA in a technical recession.
It appears this relationship can be negative for a long time and a recession still doesn't materialize...what do you use additionally to give this indicator a supporting confirmation?
i am not a lover of using monetary metrics (as you know) - so obviously i am not using this for any of my forecasting. i would use this as a secondary or confirming metric to what the other metrics are saying. i tend to lean heaviest on transport metrics, followed by import metrics. i would love to rely on certain employment metrics but i do not trust them in real time.
Latest Followers
Latest Comments
Most Commented
Posts by Themes