Employment Data Diffuses to Stalled Weakness

The obvious truism is that turning monthly job losses into gains means getting firms to hire and the Diffusion Index shows that along those lines the number of firms adding workers has only managed to improve to levels equal to the lows of previous post-war recessions.

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Third Quarter GDP -- Does One Quarter Make A Trend?

Even after accounting for government-program induced spending on cars and homes, there were enough positive signs in the data this morning to signal that a statistical end to the recession has occurred. The big jump in GDP will. . . .


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Durable Goods Orders - The Fed is Debating What?

We are all guilty of converting data into changes, percent changes or percent changes of the percent change for the purpose of identifying early a change in trend. I thought it would be a good idea today to just look at the dollar amount of new orders for durable goods without putting the series through a series of mathematical calisthenics (see chart below). Not being able to resist some sort of contortion I show the series in real dollar terms as well. Either way, the stark collapse in orders and the meager bounce from the bottom suggests what today’s consumer survey told us – the economy has bottomed but it isn’t bouncing.

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Bernanke Calls For Balance & Asia Could Care Less

 Fed Chairman Ben Bernanke spoke today on "Asia and the Global Financial Crisis" at the Federal Reserve Bank of San Francisco’s Conference on Asia and the Global Financial Crisis, Santa Barbara, California. This call for balanced growth policies in Asia has been made before by Bernanke, Geithner, Summers and others. The call appears to be falling on deaf ears as far as Asian exporters are concerned. Here are some excerpts from today's Bloomberg News article "Won Crushes Yen as Dollar Substitute in Asian Rally" --

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Capacity Utilization, Fed Policy, Oil and China -- One Big Gordian Knot

The production and capacity numbers released this morning indicate that the recession likely ended in June. But it as important, if not more so, to recognize that the reported 70.45% capacity utilization rate only just reaches the 70.93% low of the 1981-82 recession (the previous worst economic crisis since the Depression). The importance of this indicator owes to the Fed’s historic consideration of capacity utilization as the best real time indicator of economic activity (see the working paper “Improving Real-Time Estimates of the Output Gap” by Thomas Trimbur). From the official end of the past two recessions it took the Fed 38 and 32 months respectively before the first increase in the funds rate (see chart). The timing, of course, depends on how fast spare capacity is taken up. After the 2001 recession it took 32 months for capacity utilization to go from 73.53% to only 77.74%

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Cash for Clunkers -- It Worked!

The "cash-for-clunkers" program has been the subject of more negative comments and bad puns than anything an administration has put out for a long long time. Most of the comments have focused on the program's inevitable failure to permanently raise the level of spending for autos and/or anything else. By extension, the reaction is that Obamanomics is a complete bust. Political rage absent of thought to other possibilities is not the best way to go through life, unless your goal is to get crankier as you get older. The chart below plots out auto industry inventories, sales, and the inventory/sales ratio.The cash for clunkers progam moved the auto industry out of depression and into recession at an extraordinarily rapid pace. This saved a lot of investors, public and private, a lot of money,

We can see now that the program was never really intended to be a permanent boost to sales, I think even Larry Summers and Ben Bernanke knew that. The cash for clunkers trade was meant to alleviate an extraordinary overhang of unsold cars under which an entire industry was about to collapse. Normal recession metrics for sales, inventories, and production are now in play and they will be for some time but the government accomplished what it set out to do -- saving an industry and giving it the time to do what's necessary to save itself short-term and for the long haul. It will be a while before we know whether the auto industry finally gets it right, but at least they now have the time to figure it out.

Retail Sales - A Question of Momentum

Pronouncements that the “Great Recession” is over require third quarter spending to continue into the final three months of the year. While it looks like Wall Street employees will have the cash to buy holiday gifts, the country is a lot bigger and today’s retail sales give some pause to the notion that the economy has positively turned positive.

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