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Today the latest employment numbers came out and revealed that private employment was up by 67,000 jobs, but overall unemployment was up, to 9.6% from 9.5%, because of government worker layoffs (mainly Census workers). This means that 14.9 million people are unemployed (under the narrower U-3 definition).
The broadest measure of unemployment, the U-6 measure which includes “marginally attached” workers, such as those that haven’t looked for a job in the last four weeks, or that have given up looking but want jobs, or temp workers who would like full-time jobs, went up to 16.7% from 16.5% on a seasonally adjusted basis that number (on an unadjusted basis, it was down to 16.4% from 16.8%).
Does this signal a turnaround in the employment situation? I don’t think so. Here are the official trends:
From the Wall Street Journal
It is easy to see from this chart above that employment gains have flattened since January, 2010. … Continue reading Will Unemployment Continue to Climb?
Within 10 seconds of Thursday’s income and spending release for July, CNBC’s economics reporter, Steve Leisman, spotted the good news. He noted that private wages and salaries were up by 0.4% from last month — and that this welcome news showed that we’re gaining on personal income growth “not by transfer payments alone.”
Actually, [...]
The big headline today is that David Rosenberg of Gluskin Sheff says we have a better than 50-50 chance to go into negative GDP growth in H2 2010. He says Q3 will be flat and Q4 has the above odds to go into recession. In a video interview he said that this isn’t a recovery, that perhaps the NBER jumped the gun on its announcement that the recession was over, and that this crisis is unprecedented in history.
As he said in his Thursday report:
ECRI [Economic Cycle Research Institute, his favorite forecasters] is pointing to 2-in-3 odds of another contraction in real GDP. Whenever we get three straight declines in Household employment, we are in recession or about to head into one fully 98% of the time.
I urge you read his commentary; as usual he comes up with a lot of historical data to back up his belief that these times perhaps are different than your average cycle. I like Rosenberg and generally agree with him but for different reasons.
I find it more difficult to point to a specific number than does Rosenberg, but I agree that Q3 will be below expectations and Q4 will be worse. I understand that for purposes of measuring things, a negative GDP means “recession,” but these low levels of productivity and sales are bad enough and point to continued if not higher unemployment, so that going negative, at least slightly, doesn’t mean much in the big picture. We need to keep watching the declining money supply which points to deflation, and the status of bank debt and credit. My guess is that they will continue to decline and that will prompt the Fed to do whatever it takes to counteract this through Open Market Operations (quantitative easing).
There have been a lot of data coming out this week and it’s worth looking at.
It is still looking weak, but the results are mixed. … Continue reading Are We Facing a ‘Double-Dip’ Recession?
It is beginning to be hard to ignore the soft data coming in. Tuesday was no exception. Here are the highlights of the data:
Factory orders fell 1.2 percent in June which follows a 1.8 percent drop in May (revised downward from minus 1.4 percent). The decline for the durable goods component was revised two tenths lower to 1.2 percent. Orders for nondurable goods fell 1.3 percent. …
New data showing a drop in factory inventories of nondurable goods in June suggest the economy grew less in the second quarter than the 2.4% the Commerce Department estimated on Friday, based on preliminary data.
Personal income in June was unchanged, following a 0.3 percent boost the month before. The median market forecast was for an incremental 0.1 percent gain. The wages & salaries component slipped 0.1 percent after posting a healthy 0.4 percent advance in May. … Continue reading The Data Keeps Coming In Soft
The Bureau of Economic Analysis (BEA, a part of the Commerce Department) came out with its long awaited report on GDP for the second quarter and the results show a sagging economy. GDP weighed in at a positive 2.4% growth for Q2, but that is against a backdrop of an upwardly revised Q1 of +3.7%. This is something I have been expecting and it appears that more recent data is declining even more.
It has been my premise that (1) fiscal stimulus would only give a temporary boost to GDP without leaving any permanent economic growth, and that (2) the business cycle is stalling out because the government has thwarted the underlying factors necessary for a recovery.
The headline from the mainstream media has been for the most part that the reason GDP declined from Q1 is that exports have dropped and that imports have risen. In calculating the “national account” the BEA nets out imports and exports: imports result in payments to foreign sellers and exports result in payments from foreign buyers. Rising exports have been largely due to the surging value of the dollar in Q4-09 and Q1-10 as troubles in the eurozone caused institutions to dump euros for dollars. Europe’s troubles caused the euro to decline relative to the dollar and this made U.S. exports more expensive U.S. exports fell off. Further, Europe’s problems caused them to cut back on their imports that hurt not only U.S. exporters but also large exporters like China. As you can see, the euro is starting to turn around as the foreign exchange markets believe Europe is solving its problems. This may help exports if European companies recover.
But the decline in exports is not the real story behind GDP. The real story is the fact that the production cycle is stalling out because of a lack of consumer demand. … Continue reading GDP Sags In Q2 2010
The Fed came out with its Beige Book today, a summary of economic activity for June to mid-July in all of its twelve districts. The report overall noted “modest” growth if not slowing growth. According to their report:
Economic activity has continued to increase, on balance, since the previous survey, although the Cleveland and Kansas City Districts reported that the level of economic activity generally held steady. Among those Districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two Districts, Atlanta and Chicago, said that the pace of economic activity had slowed recently.
Of note in their report:
Commercial and industrial real estate markets continued to struggle in all twelve Districts. Overall, vacancy rates were flat to slightly increased and continued to exert downward pressure on rents.
Nearly all Districts reported sluggish housing markets in the months since the homebuyer tax credit expired on April 30.
Reports on retail sales during the early summer months were generally positive, although in most Districts the increases were modest.
Manufacturing activity in most Districts continued to move up since the last report, although the pace of activity slowed or activity leveled off in the New York, Cleveland, Kansas City, Chicago, Atlanta, and Richmond Districts.
Reports on banking conditions were largely mixed across the Districts.
Most Districts reporting on credit standards continued to note that lending standards remain restrictive.
The Fed doesn’t like to sound too negative in its reports, and it won’t indicate a slowing until we are well into it. I have reported that a slowing economy is a trend. Chairman Bernanke said last week: … Continue reading Fed Reports A Sluggish Economy
The markets behave as if everything is just fine. This week the S&P 500 was up 7.3% for the month (from 1027 to 1102), corporate earnings have been looking good, retail sales inched up last week, the CPI is low, interest rates are low, Dr. Bernanke is ready to pump money into the economy if things go awry, most European banks passed their stress test, and we’ve got a new financial markets regulation bill which will save us from economic collapse.
Yet most folks don’t believe things are getting any better. What’s wrong?
Here’s some data I gathered for the week of economic reports that might shed some light on the topic:
The U of Michigan’s consumer sentiment index crashed: it dropped from the June high of 76 to a mid-July reading of 66.5. About 10 points. This could mean that consumers are pulling back, according to the data.
The latest Conference Board’s Index of Leading Indicators turned negative, down 0.2% in June. In May it was up 0.6%. According to my report, if you take the interest rate spread out of their index, it would have fallen 0.6%. (See Leading Indicators Have Turned South.) … Continue reading If Everything Is So Good, Why Am I Feeling So Bad?
I am always amused when Bloomberg or The Wall Street Journal has headlines like this:
“Economists Express More Optimism Than General Public,” or “Economists Split Over Financial Overhaul Bill.”
Are we to expect that economists agree on everything? Are economists any better at assessing the economy than the people who are the economy? Why do they even [...]
David Wessel, I have five words for you: post hoc, ergo propter hoc.
Mr. Wessel is the Wall Street Journal’s chief economics commentator, and is often the face of the Journal on television. He wrote an article recently (“Bailouts Save Day, Win Scorn“) that laments the fact that, despite the fact that the bailouts saved the world, Mr. and Ms. America don’t believe it. In fact, he points out that Americans’ distrust of government and large corporations has grown as a result of the bailouts, something they see as unfair, and an example of cronyism between Wall Street and Washington.
He says in the article:
The world has had a terrifying brush with another Great Depression. Although the recent scare in Europe is a reminder that this isn’t over yet, it looks like we’ve escaped that—in no small measure because of taxpayer-financed bailouts and fiscal stimulus, as maligned and imperfect as they were.
Mr. Wessel is a bright guy, a star of a pro-capitalism newspaper. Yet he makes serious economic and logic errors that are not based on theory or the record. He needs a lesson in economics and epistemology (the science of how we know what we know).
Post hoc, ergo propter hoc is a Latin phrase describing a logical fallacy. The fallacy is: because A occurred and then B occurred, then A caused B. In modern behavioral economics this also coincides with the principle of “confirmation bias,” where you look for data that coincides with your desired conclusion.
There are two fallacies here. … Continue reading Bailouts Didn’t Save Day, Deserve Scorn
Several things are happening with unemployment which are interesting and indicative of where we are in the business cycle.
There is no question that private sector jobs (nonfarm payrolls) are increasing. They were up by 231,000 jobs in the BLS’s April report.
 Courtesy Wall Street Journal While government jobs upped the numbers to 290,000 you can’t count those jobs in determining whether we are in a recovery. And many government jobs (66,000) were Census jobs that are only temporary anyway. Non-federal government employment actually dropped as states and municipalities cut back.
Strength was seen in: professional and business services, up 80,000; manufacturing, up 44,000; leisure and hospitality, up 45,000; education and health services, up 35,000; construction, up 14,000. Manufacturing has added 101,000 jobs since December.
To put this in perspective, in the past two year we have lost 8.5 million jobs according to the BLS, more than half of today’s total unemployed. In the first four months of 2010 we’ve averaged 143,000 new jobs a month.
Employment recovery is good. Unemployment is a different thing. New jobs don’t account for the total labor workforce. People come and go from the labor pool for a variety of reasons. If more people are looking for jobs after, say having given up looking, the unemployment totals can go up. This is what happened in April.
… Continue reading Employment vs. Unemployment
I am tired of the cheerleading by the mainstream press where they see every positive sign as a sure sign of recovery and every negative sign as “unexpected.” Every article I read on new data from the Wall Street Journal or Bloomberg is the same–with mind numbing regularity. Worse is that they always find some economist to give them a positive quote to the effect that we are “turning the corner” or “the recovery is self-sustaining.”
Here are some examples from recent news. These aren’t cherry-picked:
Initial jobless claims rose by 18,000 for the latest reporting week of April 3, up to 460,000.
WSJ: ” jobless benefits rose unexpectedly last week.”
Bloomberg: “More Americans unexpectedly filed claims for jobless benefits …” They like to get someone who is bucking the report to make us feel better and it’s either Home Depot or Caterpillar: “Home Depot Inc., the largest U.S. home-improvement retailer, is adding store jobs for the first time in four years as it expects a rebound in sales, Chief Executive Officer Frank Blake said.”
More on the unemployment situation later. … Continue reading Cheerleading By The Media
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