Category: Recession

Economics Update

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It’s jobless Thursday, and initial unemployment claims are up again, t0 465,000, with the 4-week moving average falling yp 463,250 from 466,500, continuing claims falling by 48,000 to 4.49 million, and emergency claims rising by 208,000 to 5.17 million.

All in all, not a pretty picture, and neither are home sales, notwithstanding the press noting how much better August was than July, because up 7.6% from July means less than down 19% from August 2009.

In the business world, Blockbuster video filed for bankruptcy, which is not a surprise, it’s been expected for months, but it’s still the end of an era.

So the Recession is Over?

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The National Bureau of Economic Research has declared that the recession ended in June 2009:

It’s official: The Great Recession ended 15 months ago, in June 2009. That was the word Monday from the economists at the National Bureau of Economic Research, the outfit that tracks the U.S. business cycle based on a variety of economic variables.

By their calculations, the downturn that began in December 2007 lasted 18 months, or the longest on record since the 43-month plunge of the Great Depression. On the other hand, the recession was only two months longer than the 16-month downturns of 1973-1975 and 1981-82, the two other most serious post-World War II periods of falling economic growth. The 2007-2009 downturn was painful but not extraordinary in historical context.

So, my 11 months of unemployment were in a recovery?

We have been in recovery for 15 months?

You’ll also note that this is a pretty mild recovery. The brutal 1981 recession had GDP exceeding peak about 18 months later, and this “recovery,” such as it is, even if we don’t experience a double dip, or just …… dare I say it? …… malaise, and we will be looking at something over 4 years.

Well, this recovery and $3.95 will get you a small Starbucks® latte.

Economics Update

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It’s jobless Thursday, and the initial claims numbers are out, with initial claims falling to 450,000, the 4 week moving average falling to 464,750 last week’s 478,250, continuing claims falling 84,000 to 4.49 million, and emergency claims fell by over 500,000, which is all a good thing, though the story also mentions that the Federal Reserve Bank of Philadelphia’s general economic index missed expectations, remaining in the contractionary range, while the New York Fed’s Empire State Index fell but remained in positive territory.

In terms of other general measures, we have conflicting data, with inventories rising strongly, retail sales rising in more sedately, and the NFIB’s small business confidence rising modestly to an anemic 88, while on the other side we see industrial growth slowing in August.

Real estate, on the other hand is pretty grim in the post-tax credit days, with home repossession spiking, and CoreLogic’s home price index showing no year over year gain for the first time in five months, and home mortgage applications fell this week.

On the inflation front, the Producer Price Index came out, and while there is still little inflation in the core rate, but food and energy costs are rising more sharply, though still well below a 6% annual rate.

It Looks Like a Commenter on the Blog Will Become Chairman of the Council of Economic Advisors

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Austan Goolsbee, who I’ve posted about a dozen times or so, objected to a post of mine, and I (with permission) posted his response to my blog.

Well, Goolsbee has written extensively suggesting that things like Obama’s proposed R&D tax cut don’t offer a whole bunch of bang for the buck, though he has argued that he thinks the current situation **cough** incipient deflationary spiral **cough** create a somewhat different dynamic.

Well, the scuttlebutt is that Dr. Gooolsbee is going to replace Christina Romer as the chairman of the President’s CEA, and J.W. Mason has the best line that I’ve heard in a while about this:

Looks like Goolsbee is the perfect pick to succeed Romer — his advice is already being ignored even before he’s been hired.

It’s a reference to the fact that Romer’s thoughts on the stimulus were not even passed on to Barack Obama for review, and the point being made is that in a choice between economists and the economy (Goolsbee, Volker), and shills for finance and the finance industry (Summers, Geithner), that Obama will go with the latter unless absolutely forced to do so.

It’s a great line.

Economics Update

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There is more scary graph pr0n at Calculated Risk


And workforce participation is the lowest since 1984

The non-farm payroll numbers came out, and, though better than expected, they really suck, with NFP falling by 54,000 and unemployment rising slightly to 9.6%, though most of that was the demobilization of the US census, and private payrolls increased by a better than expected 67,000.

Once again, the Panglossian members of the financial 4th estate cast this as unbelievably good news.

It isn’t. It’s no where near the 100-125 K new jobs needed every month just to absorb new entrants to the job market.

Things are still getting worse.

And we have more evidence that the stimulus package that has driven the economy is running out of steam with the Institute for Supply Management’s Non-Manufacturing index, a measure of activity in the service industry, continues to decline.

It’s still showing meager growth, but only barely, and it missed expectations.

Economics Update

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It’s jobless Thursday, and initial claims fell slightly to a still awful 472,000, in the middle of the 450-485k range it has been been in, with one exception, for the past 6 months, while the less volatile 4-week moving average fell to 485,500 last week from 488,000, and continuing claims fell to 4.46 million, and the people on emergency UI fell as well.

It’s a lot of press about improvement, but this is not even treading water, this is a number in which payrolls continue to fall.

Pending home sales rose slightly in July, and beat estimates, but the market is still pretty much dead.

Economics Update

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The lede has to be the ADP report showing that private employers cut 10,000 jobs in August.

Obviously, we will get the official numbers from the Feds on Friday.

On the other hand, manufacturing grew more than expected in August.

It’s kind of a mixed bag news day, with consumer spending increasing, but real incomes fell for the first time in over 6 months and the Conference Board’s consumer confidence beat estimates.

I’m not sure exactly what they are spending money on though, because car sales had the weakest August in 27 years, which would imply an aversion to big ticket purchases.

In real estate, the Case-Shiller home price index rose in June, though that’s probably more a result of the now-expired tax credit than anything else, mortgage applications rose slightly, though, unsurprisingly, more so for refinance than it did for home purchases, and construction spending was significantly lower than estimates.

In the “these are real lives that are being f%$#ed with” category, bankruptcy filings fell in August, though they still remain at a near 5 years high.

Finally, Canada’s economy slowed significantly in the 2nd quarter.

Economics Update

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Well, they just revised the 2nd quarter GDP, and it went from an initial reading of 2.4% to a 1.6%, though it should be noted that a lot of this was driven by a surge in imports.

Still, this is not an economy expanding, first the US is one of the few nations on earth that applies hedonic adjustments to GDP, and the rate does not even cover growth in population.

But the banks can meet their bonus payments, and who cares about ordinary people.

Well maybe the people who sell stuff to, or make stuff for, ordinary people might care, because the ordinary people, as reported by the Thomson Reuters/University of Michigan’s Surveys of Consumers, are not in a spending mood:, as consumer sentiment fell again.

Economics Update

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Yep, and the news is not any improvement over yesterday.

New home sales came out today for July, and they hit a 40-year low, and the price of a new home fell to a 7 year low.

When juxtaposed with the fact that , you can see how things get ugly.

And the consumer is continuing to deleverage, which is one reason why consumer credit card debt has fallen to an 8 year low, though part of this is the 2005 bankruptcy laws, which is driving people to default on their mortgages in favor of paying down credit card debt:

Changes to the US bankruptcy code, enacted in 2005, are coming back to haunt banks, according to Yra Harris, a veteran trader at Praxis Trading.

Harris told CNBC that banks lobbied hard for changes to the bankruptcy code, but the legislation is now having the effect of encouraging consumers to do all they can to pay down their credit cards, while leaving their mortgage payments on the backburner.

Karma is a bitch.

In many states, mortgages are non-recourse loans, so once they have the house, they cannot go after the consumer, while in every state, credit card companies can attach wages, etc., so, rather unsurprisingly, consumers are running the numbers and making their choices.

Said consumers are not spending.

I’m beginning to think that absent a 20-40% devaluation in the value of the US dollar, we won’t be out of this mess for a decade or more.

Holy Crap

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Scary picture h/t Calculated Risk

They, whoever “they” are, were predicting that existing home sales would be fall post tax credit to an annual rate of something north of 4½ million.

Well, they were wrong. Existing home sales fell to 3.83 million, a 15 year low, and the 27.2% drop was the biggest since they, whoever “they” are, started collecting data.

What’s more, housing inventory has risen from 8.9 months to 12.5 months since May.

The thing is, this was foreseeable. Everything that has been done in terms of real estate has been about extend and pretend.

Whether it’s the fraud perpetrated on desperate people through HAMP, or the ruinously wasteful home buyer tax credits, this has all been about propping up housing prices in the short term in the hope that the banks can nickel and dime small consumers to generate enough profits to dig themselves out of their hole.

They keep pushing the sh%$ up hill, expecting to reach the crest of the hill, and it ain’t happening, and now this pile is collapsing back down on us.

Recovery my ass.

Economics Update

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Capacity Utilization


Industrial Production
H/t Calculated Risk

Retail sales rose, but missed forecasts for July, the comment of an economist quoted in the story, “The numbers are consistent with a sluggish consumer profile,” is kind of well duh thing.

Hopefully the indications that the big banks are relaxing their lending standards for small businesses for the first time in 4 years.

This is good news, since banks have increasingly attempted to move small business customers from loans to corporate credit cards, where the fees and interest, and hence bank profits, are higher.

On the consumer side, credit card delinquencies fell to the lowest level this year, which could mean that more people are getting back on their feet (good), or that more consumers are deleveraging (mostly bad, see Thrift, Paradox of).

I’m inclined to believe that it is mostly the latter, particularly since bankruptcy filings hit a 5-year high in the 2nd quarter.

We are seeing some good news in industrial production and capacity utilization, which continue a relatively robust recovery, though a lot of this gain was increased electricity consumption from a record breaking July, though a fair amount is also autos which is an unambiguously good sign. (See also the chart pr0n)

The New York Fed’s economic activity index rose in August, but again, it missed forecasts.

In the land of the blithering idiots inflation hawks, the UK district is reporting that British CPI rose at a 3.1% annual rate, down from June’s 3.2% rate, which has the inflation hawk piggies squealing that they are missing the 2% target, but as Krugman would say, we are in a liquidity trap, we need more inflation so that real interests rates (interest – inflation) is low enough to foster growth.

I would go further than Krugman, and say that both the Bank of England and the Fed should have a 6-8% target inflation rate for the next 4 years or so.

And then we have real estate, where the market seems to be deflating like the Hindenberg* following the expiration of the home buying tax credit.

Housing starts rose, but fell well short of forecasts in July, home prices flattened out in June, and home builder confidence fell in August.

*I know that the Hindenberg did not deflate, it burnt and crashed. That’s my point of this mangled metaphor, OK?

Economics Update

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Consumers are continuing to deleverage, (Thrift, Paradox of) with outstanding consumer debt falling for the 5th straight month, so people are still not spending.

On the brighter side, rail traffic increased in July YoY, though business productivity fell for the first time in 1½ years in the 2nd quarter. Additionally, this report shows that household income fell.….Not good.

It’s not surprising that the National Federation of Independent Business’s optimism index fell for the 2nd straight month.

Meanwhile, the June Job Openings and Labor Turnover (Jolts) report showed hiring slowing in June.

Finally, despite record breaking low rates, mortgage were flat this week.

Economics Update

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It’s jobless Thursday, and initial jobless claims rose again, by 19,000 to 479,000, with four-week moving average increased by 5,250 to 458,500, and continuing claims fell by 34,000 to 4.54 million, though a lot of this may be people running out their string on normal benefits.

I would note that this number has been bouncing between 450K and 480K for a few months, and that this number is around 100,000 more than is needed for a recovery in employment.

Meanwhile, in central bank land, the Bank of England kept its benchmark rate at ½%, effectively 0%, and it’s asset purchase program, aka quantitative easing, aka printing money, remains essentially unchanged.

Finally, the 30-year fixed mortgage rate hit an all time low, 4.49%. (!)

Economics Update

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Well, in the “why do they do this any more” department, we have the ADP private employment survey, which predates the official US DoL figures by all of 2 days, saying that private payrolls will increase by a rather unimpressive 42 thousand.

The total figure will be much worse, of course, since the US Census is still shedding the temporary workers they hired for their 2010 enumeration.

On the GDP front, it appears that the inventory data which contributed to a large portion of recent GDP gains was wildly over optimistic.

On the other hand, the Institute for Supply Management’s Non-Manufacturing index rose in July rose to 54.3 from 53.8, beating expectations, in June, and mortgage applications, including purchase applications, rose again.

Economics Update

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We have a fair amount of news, most of it bad, with consumer spending and personal income flat, pending home sales falling sharply in June, and the Institute for Supply Management’s manufacturing survey falling more than expected, though the latter still indicates (rather anemic) growth.

Additionally, we have the Wells Fargo/Gallup survey of small business sentiment hitting a new low, while personal bankruptcy filings rose 9% in July.

As to the good news, we have…

We have…

We have…

We have…

Ummmm…A survey of economic mood in Europe hitting two-year high?

Wanker of the Day

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Little Timmy Geithner just penned an OP/Ed today, “Welcome to the Recovery,” which is remarkably clueless.

While he admits that there is still a tough row to how, his he characterization of the recovery is positively Hooveresque.

I am surprised that he did not announce that “Prosperity is just around the corner.”

He declares, “We are on a path back to growth,” and that “The economy on the road to recovery”.

I understand the desire to paint this rosily, but it is a political loser: Americans do not respond well to claims of a robust recovery when ⅙ of the workforce (U6) is unemployed.

I think that the problem here is that Geithner does not see this unemployment level as a problem.

Why else would he suggest that at a time when there are 5 job applicants for every job opening, a record, that the problem is just that American workers need training:

The share of workers who have been unemployed for six months or more is at its highest level since 1948, when the data was first recorded, and we must do more to ensure that they have the skills they need to re-enter the 21st-century economy.

This is offensive and wrong on so many levels.

As Atrios notes:

The sentence that should have been written is:

The share of workers who have been unemployed for six months or more is at its highest level since 1948, when the data was first recorded, and we must do more to ensure that they have jobs.

But obviously that’s not what they’re thinking. Unemployment is a skills mismatch problem, unemployed losers don’t “have the skills they need to re-enter the 21st-century economy.”

We’re screwed.

Anyone who thinks that the problem is a temporary dislocation of workers, as opposed to a period of catastrophic job loss should be considered to lack the skills necessary to be employed in the 21st century economy.

Fire Tim Geithner now.

Economics Data Points for Last Week

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So, GDP growth has fallen sharply, down to a 2.4% annual rate in the 2nd quarter, as compared to the anemic-for-a-meaningful-recovery 3.7% in the 1st quarter, which appears to indicate that the recovery is running out of steam.

What’s more, the base number is overly rosy to begin with, since it is driven by inventory restocking from industries that had drawn down to the bone, home builders rushing to beat the tax credit deadline, and a significant increase in government spending.

Consumer spending rose by only a 1.6% annual rate.

What’s more, initial unemployment claims remained above 450,000, at least 50K above a tepid recovery in employment.

I’m beginning to agree with Mohamed El-Erian of PIMCO, who says that employment has become a leading indicator, since it drives consumer spending.

Economics Update

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The obvious lede here is the fact that the Fed has released its Summary of Commentary on Current Economic Conditions, better known as the Beige Book, which was not good, weakening slightly from June’s Beige Book, but it is not downright awful.

This is the already anemic stimulus, and a mild restoration of inventories running out of steam.

If you want some more detail, you can look at the Dallas, Richmond Fed Manufacturing surveys have shown a sluggish economy, and the Chicago Fed National Activity Index has fallen.

We are also seeing that consumer confidence fell to a 6 month low in June.

Additionally real estate is really pretty pathetic, with the number of renters skyrocketing as the home ownership rate has hit an 11 year low, so much for the Bush/Greenspan real estate wealth.

Note that home sales did rise sharply in June, over an expiration-of-the-tax-credit crippled May, but it still was the worst June ever recorded.

Mortgage news was mixed though, with mortgage applications falling slightly, though the number of applications for home purchases rose slightly.

Finally, durable goods orders fell for the 2nd straight month in June.

Economics Update

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It’s jobless Thursday initial claims rose by 37,000 to a 464,000 (seasonally adjusted), worse than forecast, with the less noisy 4 week moving average rising by 1,250 to 456,000, though continuing claims fell by 223,000 to 4.49 million.

In real estate, the inventory of homes for sales has risen year over year, and existing home sales fell in June.

They will fall in July as well, since we are still seeing the tailing off of closings from contracts that were signed before the tax credit expired.

About the only thing that shows any hope in the housing market is that mortgage rates continue to fall, though they really running up against the zero bound.

Economics Update

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Well, if consumers are 70% of the economy, the fact that the Thomson Reuters/University of Michigan consumer confidence index numbers fell to a nearly 1 year low.

This, along with a falling consumer price index, which indicates that a deflationary spiral may be nearer than we would like, are not good news.

Additionally, notwithstanding heroic/stupid efforts to prop up the housing bubble, home builder confidence has hit a 15 month low.

On the brighter side, Moody’s survey of commercial real estate prices is rose in May, and the National Association for Business Economics’ latest survey of employers is showing that employers are looking to hire more than they were a year ago, though admittedly, that is not saying much.