ciel

A Roller Coaster of Economic Indicators

Terrific analogy, Mr. Frankel. Very easy to understand. But it seems to me to be missing a few bits of information that have been coming more and more into focus these past few weeks: 1) The Residential Housing Cart (which if anything has these past few weeks been heading back down on its own with or without the rest of the coaster -- potentially "derailing" the entire ride) ... and also 2) (Un)Employment/Jobs seems to be quite a bit heavier this recession-go-round... threatening to cause a pronounced ripple up the very length of the ride, as most of the rest of the carts are attempting to move forward with disregard for the caboose they are now carrying... a load which initially both sent the coaster down faster, and then also gave it its initial push up the hill --- but again, now which is a nasty leash, at best .. talk about having more than one face!

Economy Watch: Is There a (Second) Downturn on the Horizon?

bob adamson wrote
>>>now will be seen in historic retrospect to be the recovery phase from a deep but short recession.

"deep but *SHORT* recession"??

Say what?

NY Fed Model: No Chance of Recession in 2010

Let me see if I do understand this magical "Probability of Recession" meme you and other several others keep trumpeting about --

Prior to the start of the worst recession since the Great Depression this tool, and I think I do use that word appropriately, gave a warning of an at-worst 40% chance of impending recession... and that series high was hit even as the Great Recession had actually already begun. Twelve-months prior to Dec. 07 (it's supposed predictive powers) it had been flagging a whopping 20-25% chance of recession 12 months out.

For shits & giggles, I wonder how well it did predicting the odds of recession for Q2 of this year (GDP just came in with an annualized rate of "growth" of -1% for that quarter) --- Ah, yes, the Fed Magic Ted Spread Probability Wondermeter gave us about an 18% chance of being in recession.

Stunning.

Initial Unemployment Claims Filings Fall to Six-Month Low

It is encouraging. After some lengthy indecisiveness, no doubt related to the bankruptcy-related, anomalously early Chrysler and GM closings, the 4wma is now sending a strong signal that technical recession is over, or will be very soon.

The $64,000 question is whether or not the economy starts to really slip later this year, or next. Long and weekly leading indicators suggest that a return to technical recession is unlikely, but those who point out that this has been no ordinary downturn do have a very good point.

Jobless Recovery: Fasten Your Seatbelts

A couple of observations

1. Perhaps as has been stated by others, GDP has actually contracted more than the estimates show.

2. By the same token, perhaps GDP was even lower that what the books show (maybe even flat to barely negative) during a few quarters of the so-called recovery back in 2002-2003. A recent study suggests that productivity during the oughts has been lower than thought, which adds further credence to this school of thought.

3. Just what kind of "recovery" is it, *really*, if employment is still contracting, anyway? .. At best, 2002-2003 wasn't a "jobless recovery" - it was a "jobLOSS recovery" ... and I just don't think we can honestly square that with Econ 101 very well, whatever the productivity rate may be.

Whatever the cause of the so-called recovery of 2002-2003 being so very recession-like, it might also just be more appropriate for us to identify recessions not by what GDP is doing, but more-so by what *per capita* GDP is doing.

Daniel Gross: The Recession Is Over

1. We are two weeks into the third quarter. Tell me again what the third quarter GDP is probably going to print after we've gone through about ten more weeks of it.

2. One quarter's, or even two back-to-back quarters' of positive GDP, does not an end to a recession-make. We had two consecutive quarterly up prints in the first half of 2008, only for the economy to swoon again. In the big picture, this economy is still susceptible, and there are several things that can still go drastically awry these next several years, as the unwinding of this massive, global bubble is still underway.

3. As for initial unemployment claims - show me a few more weeks ... in a row... below 600,000 *outside of a shortened holiday week* before crowing about it. Several prior months worth of claims have certainly been heading in the right direction, but at a painfully slow, and rather inconclusive, rate of improvement.

4. Employment is a good metric to follow. It gives us some insight into the potential prospects for consumer spending, and thus, company earnings - good, bad, or indifferent - And this is perhaps particularly true in and/or coming out of this recession.

5. Even if we print a 2.4% annualized rate of GDP growth in the third quarter (possible) *and* the recession did truly end in the second (lots of doubt exists about that one, there) - a +2.4% quarter coming out of a downturn as sharp as this would be anomalously shallow. We had better see a plus 5, 6, 7, 8, 9, or 10 quarter by the first quarter of 2010, or start to come to grips with the fact that the economic "recovery" could be more accurately described as a growth recession - and a growth recession following such a deep downturn is also nothing to get too exited about.

Jobless Claims as Percent of Labor Force Fall for 3rd Month in a Row

The comments above pointing out that this series began losing its correlation with reality back in the 80s, and then effectively lost it altogether under the Clinton administration, is spot on.

It's unconscionable how some bloggers continue to sling this series around as some kind of "proof" that somehow "times aren't really all that bad!" and/or "the economy is on a genuine mend!"

U.S. Economy Grows for Second Consecutive Month in June

GNE,

If the service sector represents roughly 70% of the US economy, and the ISM suggests it is contracting, just because the ISM Non-mfg has not tracked long enough for them to make a statement about its correlation with actual GDP does not in any way negate its potential usefulness as a tool to extrapolate such information.

Put most simply, if services are indeed roughly 7/10 of the US economy, which they are, and they are contracting, which they are, then the rest of the economy had better be running on all cylinders, and possibly then some, in order to print positive GDP numbers.

Baltic Dry Index, Construction Spending: More Good News

"The Chinese have to consume more" - Oh, yes, they are such a consumption powerhouse.

At least you could be partly right - at the rate things are going consumption-wise in the rest of the world, they actually might be the relative consumption leader in another year or two of this mess.

The non-res bubble looks set to fall as hard or harder as residential has. Non-res almost always starts to tank long after residential began its fall. No surprise that it has still held up, so far.

U.S. Economy Grows for Second Consecutive Month in June

Manufacturing is a far smaller share of the US economy than when the ISM Mfg index was created.

These days, the Services ISM is the index to watch; and, as 70% of the US economy (services), any reading under 50 on that index imlies negative GDP, with almost complete disregard for what the ISM Mfg is doing (no surprise, really, as manufacturing represents less than a fifth of the economy).

2 More Green Shoots Suggest Economic Recovery

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.

Confusing Unemployment Numbers

Hi Steve.

I have to take exception with your statement that this 1.1% monthly contraction "is not the kind of fall you would expect at the end of a recession," because Q1 1975 was the very quarter within the very year that the 73-75 recession ended.

March 1975 saw a monthly contraction of a little worse than 1%, and yet March also marked the NBER-defined end of the recession.

Graphs: research.stlouisfed.or...[1][id]=INDPRO&s[1...


and research.stlouisfed.or...[1][id]=INDPRO&s[1...

It will be perhaps very telling to see what industrial production does over the summer. If it can perk up in the face of Chrysler and GM, we might be on to something with a little more traction. If it keeps heading south, not a big surprise. If it continues to drop at these rates... well, look out below!

The Labor Market Has Not Yet Signaled a Turning Point in the Markets

Professor, I have long had a few questions that I have not yet found very satisfying answers for, which are perhaps very related to the current recession, and definitely related to your entry. If at all possible, could you shed some light on them in either a reply, or subsequent post:

First, I am perplexed and troubled by the recent trend of declaring recessions over long before the job market turns. Specifically, I understand how the unemployment rate has almost always behaved as a lagging indicator... but I'm not talking U3.. I'm talking about what you have just touched on: "Total Hours Worked" --

Despite a respite in late 2001, this series relapsed, and continued to *contract* until finally reaching a *trough* in mid-2003. If GDP can really be guestimated to be total hours worked +/- productivity, even if productivity was higher than god during the early oughts, it sort of seems reasonable to conclude that GDP may have been overstated from 2002 to 2003... or, at the very least, GDP overstated the health of the real economy during that time.

Heck, taking that out to the next thought: MEW seems to have whitewashed the years after 2001, regardless. From 2001 through 2006, it seems the US, and indeed much of the world, was living on hallucinated wealth, courtesy of Bank of Bubble House ATM, et. al.

Recently some work I am sure you are familiar with has been done that suggests productivity wasn't even as high as originally thought over the course of this past decade. If that is true, might we see benchmark reductions to GDP that throw one or more quarters during that rather anemic 2002-2003 period into negative territory?

Bringing me to my second question: What exactly was it that prompted NBER to adjust the official date of the 73-75 recession, and exactly what was that adjustment?

Bringing me to a third question, really: Would a bigger-than-noise downgrade to GDP during the 2002-03 time frame prompt the BCDC to take another look at start-stop dates of the previous recession?

I recall it was Martin Feldstein who wrote that there's no such thing as a 'jobless' recovery' ... and for most people, this rings entirely true, regardless of what the stock market is or is not doing, regardless of whether or not a companies earnings are on the mend, regardless of whether or not another bank is saved by the FDIC. All those other things, they almost always pale in comparison to whether or not people are still working fewer jobs and/or total hours....

Key Unemployment Indicator Signals Recession Might Be Ending

John, Thanks :)

I should probably have stated my interpretation of the drop in hours worked more clearly, as while part of my reply was in regard specifically to the manufacturing hours worked, when it came to the equivalent loss of 350,000 jobs last month, I was referencing the drop in total hours worked in the entire economy, which fell by 0.7% (Ref. MarketWatch: www.marketwatch.com/st...)

As for the estimated equivalent loss of 350k, this was not my own work, but something I had read from Joe LaVorgna, who has stated that every tenth of an hour drop in the workweek is equivalent to a loss of roughly 300,000 to 350,000 jobs (Ref. JBUSA: www.jobbankusa.com/New...) and (Ref. John Jansen post: seekingalpha.com/artic...)

Ultimately, about the only two things in my analysis above that I can personally take credit for are the nit-picking lol

Cheers! ;)

Key Unemployment Indicator Signals Recession Might Be Ending

John Lounsbury, Thank you for this balanced analysis, complete with great links. I may have noticed a few small mistakes made in the graphs provided (for example on manufacturing hours - false signals: www.thestreet.com/stor...) you list Sept 1959 as being the "fake minimum" for the 4/60 - 2/61 recession. I presume that either you meant to write in "Sept 1960" - or, I would just add that the "fake minimum" shouldn't even be considered, as it occurred even prior to the start of that recession. Another tiny, perhaps overlooked mistake: In the "Insured Unemployment Peak" Graph: www.thestreet.com/gall..., you list July 1975 as "0" delay from the recessions (March) trough. Small things, but I thought I might ask you to correct or explain them.

But, I nit-pick. The analysis is still excellent!

Now for the bad news: By your own analysis (with which I am in large agreement) we fell back in May on Manufacturing Hours Worked, to what looks like a new cycle minimum, and as such, April could not have been the trough to the recession, all else being equal.

Even more alarming, the decline in total hours worked is about the equivalent of 350,000 extra lost jobs. In other words, had we not seen the time shaved off the average hourly work week, we could have expected, perhaps, about 350k additional net job losses last month, for a grand total back in the 700,000s - Ouch!

This obviously leads one to consider: If Initial Unemployment Claims continue for the next few weeks in the range that they have been for the past several weeks -and- the average workweek does not decline yet again in the current month, might we then expect to see June's nonfarm payrolls return to the -500k and worse club.

All this talk of incipient recovery, but if too many green shoots wilt quickly on the vine, many a Jane & Joe Consumer will begin worrying that talk of recovery is just a bunch of hype.