ECRI Leading Indicators Fall to Lowest Level Ever
One of the questions I seem to be getting all the time is “When is this recession going to end?”
To answer that, I turned to Lakshman Achuthan of the Economic Cycle Research Institute (ECRI). Their leading vs coincident chart provides insight into that question.
The Return of Tall Paul
I find this to be very encouraging:
President-elect Barack Obama will appoint former Federal Reserve Chairman Paul Volcker on Wednesday to be the chairman of a new White House advisory board tasked with helping to lift the nation from recession and stabilize financial markets, Democratic officials say.
The panel will be called the President's Economic Recovery Advisory Board.
Professor Jeffrey Frankel on the Recession
Professor Jeffrey Frankel of Harvard University’s Kennedy School of Government is also on the Recession Dating Committee at the National Bureau of Economic Research.
Go check em out.
China's Stimulus Plan Is No Such Thing
Paraphrasing Nixon, have the Chinese become Keynesians now, too?
I don't believe so.
China's proposed $586 billion dollar stimulus plan sure generated a lot of excitement this past weekend. It was amusing to watch the SPX futures tick up on this supposed new program. Especially when we compare it with the $170 billion in tax rebates this summer -- The Economic Stimulus Act of 2008 -- which was only 1% of GDP of the US, versus about 18% of China's GDP.
But is China's plan really a new stimulus? The short answer is no, and it took the market about half a day to figure this out yesterday.
America's Two Auto Industries
Fantastic article in the WSJ today about the pending bailout plan to GM, Ford and Chrysler.
America has two auto industries. The one represented by GM, Ford and Chrysler is Midwestern, unionized, burdened with massive obligations to retirees, and shackled to marketing and product strategies that have roots reaching back to the early 1900s.
The other American auto industry is largely Southern and non-union, owes relatively little to the few retirees it has, and enjoys a variety of advantages because its Japanese, European and Korean owners launched operations in this country relatively recently. Their factories are newer, their brand images and marketing strategies are more coherent -- Toyota uses three brands in the U.S. to GM's eight -- and they have cars designed for the competitive global market that exists today.
Hire This Man!
Depression era flashback: Walking to work on Friday (42nd St and Vanderbilt), I bumped into Paul Nawrocki. He is looking for a job in Operations without much success. He got the idea for the sandwich board from an ex-Lehman employee who found success with it.
Open Thread: What Now?
Ok, we have the Presidential election behind us, and ugly NFP yesterday (more to come) even more Bailouts soon (more AIG, more GM, who knows what else).
Market volatility still remains crazed, and we are nearing key levels of support. Earnings have been punk. The consumer is MIA. Credit is improving, Housing still stinks, and the deleveraging seems to be never ending. The Eliot Wave folks are waiting for a nasty wave 4 (or is it 5?) and
A Closer Look at Employment Data
The NYT had a terrific run of charts in the online version:
Change in NFP
Part Time Workers Who Want Full Work
U.S. Jobless Rate Hits 14-Year High
PETER S. GOODMAN
NYT, November 7, 2008
Tomorrow is NFP day, and I am expecting a doozy of a number: a loss of 250-300k jobs, and the Unemployment rate ticking up towards 6.5%.
But even that number does not accurately portray the amount of employment damage that has been done the past few years. Indeed, one of the ways we correctly anticipated the economic falloff was by analyzing the weak employment data beneath the headlines over the past few years.
Does that relatively mild U3 unemployment rate accurately portray the employment circumstances? U3 is the official UE rate, but the BLS also reports a full -- and much uglier measure -- U6. I've long said that the U6 number is more accurate, and more and more people are recognizing that as the case.
Dan Gross of Slate and Newsweek has been in the same camp for quite a while. A column of his from October is worth resurrecting prior to tomorrow's Employment Situation Release. NFP. Dan observes:
"It's hard to overstate the poor numbers coming out of Wall Street in recent months. But could it be that we're overstating the gravity of the situation? As job losses have mounted and consumer confidence has plunged, policymakers, news organizations, econo-pundits, and even some of my Slate colleagues have noted that the unemployment rate, which rose to 6.1 percent in September, seems to be at a nonrecessionary, noncatastrophic, low level. The unemployment rate is still below where it was in 2003; and between September 1982 and May 1983, the last very deep recession, it topped 10 percent.
But maybe the employment data are much worse than they seem. In the past year, the two key measures of employment—the unemployment rate and the payroll jobs figure—have been poor but not awful. The unemployment rate has risen from 4.5 percent a year ago to 6.1 percent. And in the first nine months, 760,000 payroll jobs were lost. This is unwelcome but not catastrophic. So why do things feel so bad? It's not because, as Phil Gramm suggested, we're a nation of whiners. And it's not a matter of columnists and spin doctors shading the numbers to make things look worse.
Rather, these two figures are undermeasuring the weakness in the labor market. By some measures, in fact, the job situation is worse than it has been at any time since 1994.
Wanna know why? Major changes in the BLS methodology since 1994. As Dan writes:
"BLS has been compiling alternative measures of labor underutilization. There are many different varieties of labor underutilization. There are marginally attached workers: "persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past." There are discouraged workers, a subset of the marginally attached crowd, who have "given a job-market related reason for not looking currently for a job." There are people who work part-time because they can't find—or their employer can't provide—full-time work. There are people who have left the work force entirely. Neither the unemployment rate nor the payroll jobs figure captures the plight of many of these folks.
The alt.jobless rate was waring of trouble long before the U3 headline data did. U6, the broadest measure of unemployment, rose to 11% in September. That's the highest level since the data series started in 1994. Dan points out that Its also "significantly higher than it was in the last recession, in 2001. . . The unemployment rate may still be historically low, but the underutilization is historically high."
What does this mean for tomorrow's number? Only that the economy has been far worse, for far longer, than most investors may realize.
Unemployment Reporting: A Modest Proposal (U3 + U6) (June 2008)
Pervasive Pollyannas of Prosperity (July 2008)
Persons “Marginally Attached to the Labor Force” +B/D (July 2008)
The 20-Hour Workweek
The unemployment rate seems low. That's because it's not counting all those underemployed workers.
Slate, Oct. 22, 2008, at 3:59 PM ET
The Onion: Our long national nightmare . . .
A pretty good Onion headline: Nation Finally Shitty Enough To Make Social Progress:
Although polls going into the final weeks of October showed Sen. Obama in the lead, it remained unclear whether the failing economy, dilapidated housing market, crumbling national infrastructure, health care crisis, energy crisis, and five-year-long disastrous war in Iraq had made the nation crappy enough to rise above 300 years of racial prejudice and make lasting change.
"Today the American people have made their voices heard, and they have said, 'Things are finally as terrible as we're willing to tolerate," said Obama, addressing a crowd of unemployed, uninsured, and debt-ridden supporters. "To elect a black man, in this country, and at this time—these last eight years must have really broken you."
Added Obama, "It's a great day for our nation."
Heh heh . . . That is, unfortunately, only a sleight exaggeration as to the landscape. Of course, for wit, prescience, and humor, nothing beats the Onion's 2001 pre-inauguration headline:
"My fellow Americans," Bush said, "at long last, we have reached the end of the dark period in American history that will come to be known as the Clinton Era, eight long years characterized by unprecedented economic expansion, a sharp decrease in crime, and sustained peace overseas. The time has come to put all of that behind us."
A classic: So witty, so foresighted . . .
Nation Finally Shitty Enough To Make Social Progress
NOVEMBER 5, 2008 | ISSUE 44•45
Bush: 'Our Long National Nightmare Of Peace And Prosperity Is Finally Over'
JANUARY 17, 2001 | ISSUE 37•01