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CNBC: Economy Caught in Depression, Not Recession

August 25, 2010 By Jeff Leave a Comment

I be the first one to admit I’m a pessimist on the economy, but not even I’m this pessimistic:

Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression, Gluskin Sheff economist David Rosenberg said Tuesday.

Writing in his daily briefing to investors, Rosenberg said the Great Depression also had its high points, with a series of positive GDP reports and sharp stock market gains.

But then as now, those signs of recovery were unsustainable and only provided a false sense of stability, said Rosenberg.

Rosenberg calls current economic conditions “a depression, and not just some garden-variety recession,” and notes that any good news both during the initial 1929-33 recession and the one that began in 2008 triggered “euphoric response.”

“Such is human nature and nobody can be blamed for trying to be optimistic; however, in the money management business, we have a fiduciary responsibility to be as realistic as possible about the outlook for the economy and the market at all times,” he said.

Mr. Rosenberg’s argument it compelling, I’m not sure agree with him, but like I said I’m a pessimist on the economy. I’ve thought all along this so called recovery was more akin to a dead cat bounce than an actual meaningful sustained recovery… And that’s what the data seems to indicate. All the indicators I’m looking at, employment, housing, durable goods, and consumer confidence are pointing to anything but a recovery. Are we actually in a depression? I don’t know, but I think it’s safe to say this isn’t a garden variety recession.

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Initial Jobless Claims Rise… Unexpectedly… Again

February 25, 2010 By Jeff Leave a Comment

Here we go again, another week and another, um, “unexpected” rise in initial jobless claims:

The number of new claims for unemployment benefits jumped unexpectedly last week as heavy snows caused layoffs to rise.

In addition, many state agencies in the mid-Atlantic and New England regions that process the claims were closed due to the storms and are now clearing out backlogs, a Labor Department analyst said.

The department said Thursday that first-time claims for unemployment insurance rose by 22,000 to a seasonally adjusted 496,000. Wall Street analysts polled by Thomson Reuters expected a drop to 455,000.

Bad weather can cause job losses in construction and other industries sensitive to weather.

I’m sorry but I have to ask… Unexpectedly by whom???

JWF sums things up nicely:

It’s comical how every story about job losses always calls it unexpected, with pointy-headed experts baffled by the news. Maybe someone can ask Professor Obama about this grim news today during his six-hour lecture to Republicans.

Um, yeah, I’d pay money to see that!

Anyway, it’s not the weather that’s driving these new jobless claims it’s the slumping consumer confidence and  home prices coupled with the Millions of Americans who are underwater on their mortgages… roughly 300,000 of them are facing foreclosure each month. Americans simply don’t have the discretionary capital to invest or consume they they used to. Bottom line we’re not going to see anything resembling a meaningful recovery until that changes.

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New Jobless Claims Rise… Unexpectedly… Again…

February 18, 2010 By Jeff Leave a Comment

Here we go again… another week, another “unexpected” rise in new jobless claims:

The number of U.S. workers filing new applications for unemployment insurance unexpectedly surged last week, while producer prices increased sharply in January, raising potential hurdles for the economic recovery.

Initial claims for state unemployment benefits increased 31,000 to 473,000, the Labor Department said on Thursday. That compared to market expectations for 430,000.

Another report from the department showed prices paid at the farm and factory gate rose a faster than expected 1.4 percent from December after a 0.4 percent gain in December, as higher gasoline prices and unusually cold temperatures helped boost energy costs.

To be honest I’m more concerned the sharp rise in producer prices than I am about the increase in new unemployment claims. In short, inflation is starting to rear its ugly head; frankly I think we’re head for a dead cat bounce rather than a recovery. What say you?

Is the U.S. economy headed for a recovery or a 'dead cat bounce'?

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Unemployment Rate Drops to 9.7%

February 6, 2010 By Jeff Leave a Comment

I was going to post this yesterday, but there was something about the numbers that just didn’t make sense to me so I decided to hold off until I could dig through the report.

Anyway, the Associated Press got to use it’s favorite adverb, “unexpectedly“, again today:

The job market is lurching toward improvement. It just has a long way to go.

The outlook for jobs became a bit less bleak Friday when the government released January’s unemployment rate showing an unexpected decline from 10 percent to 9.7 percent. It was the first drop in seven months.

Still, the government now estimates 8.4 million jobs vanished in the Great Recession. And economists say the nation will be lucky to get back 1.5 million of them this year. They also warn it will take until the middle of the decade for the job market to return to normal.

The economy is growing, and normally job creation would be strengthening. But the job market is weighed down by employers who remain slow to hire because consumers are not spending enough. Companies worry about their prospects once government stimulus aid fades. They also fret about possibly higher costs related to taxes or health care measures from Congress and statehouses.

Heh, I hate to break this to you folks at the AP, but this wasn’t unexpected if you’ve been watching the trends over the last couple of months it was foregone conclusion that the unemployment rate hold steady or decline.

Why? For starters lets take a look at Table A-12 in the Household Survey, the number of long term unemployed, that is those who have been unemployed for 27 weeks or longer, has been rising steadily for the last several months. For statistical reasons those people are no longer considered part of the workforce.

Second take a look at Table B-1 in the Establishment Survey, the total number of jobs in the marketplace has dropped sharply from roughly 133 million in January 2009 to an estimated 129 million in January 2010… In fact if we look at the historical data the drop is even sharper… From 137 million in January 2008.

Bottom line the decline in unemployment is the result of statistical manipulation not real job growth. In short if fewer jobs in the marketplace means you’re naturally going to have a lower percentage of those unemployed.

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First-time Jobless Claims Rise Unexpectedly… Again

February 4, 2010 By Jeff Leave a Comment

This is getting ridiculous, and as predictable as sunrise… Just how many times can new jobless claims rise “unexpectedly” before the Associated Press realizes there’s nothing unexpected about it:

The number of newly laid-off workers filing initial claims for jobless benefits rose unexpectedly last week, evidence that layoffs are continuing and jobs remain scarce.

The rise is the fourth in the past five weeks. Most economists hoped that claims would resume a downward trend that was evident in the fall and early winter.

The Labor Department said Thursday that new claims for unemployment insurance rose by 8,000 to a seasonally adjusted 480,000. Wall Street economists had expected a drop to 460,000, according to Thomson Reuters.

The four-week average, which smooths fluctuations, rose for the third straight week to 468,750.

The figure is the highest in the past two months. Initial claims dropped sharply in late December, raising hopes among economists that layoffs were nearing an end and the economy would soon start generating net gains in jobs.

When you couple this report with yesterday’s news that planned layoffs have begun increasing again things don’t bode well for this so called recovery… Of course if tomorrow’s announcement from the Bureau of Labor Statistics about unemployment and job creation for January turns out to be bad news, the media will undoubtedly call it “unexpected”.

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Train Wreck: Retail Sales Fall, Jobless Claims Rise, Foreclosures set Record and the Dollar Crisis

January 14, 2010 By Jeff Leave a Comment

Whew, I can’t believe I got all that in headline!

Anyone who has read this blog for any period of time knows I’m a pessimist on the economy, in short I don’t see any reason to be hopeful:

Retail sales unexpectedly fell in December, leaving 2009 with the biggest yearly drop on record and highlighting the formidable hurdles facing the economy as it struggles to recover from the deepest recession in seven decades.

In another disappointing economic report, the number of newly laid-off workers requesting unemployment benefits rose more than expected last week as jobs remain scarce.

Still, many economists, puzzled by the retail sales decline that follows reports from retailers of brighter holidays, cautioned that the December figures don’t necessarily signal a big consumer pullback and could be a blip.

Right, retail sales fell 0.3 percent in December, overall sales for 2009 fell 6.2 the sharpest decline on government records going back to 1992.

On the jobs front, the Labor Department reports that new claims for unemployment insurance rose by 11,000 to a seasonally adjusted 444,000, sharply higher than the 3,000 new claims forecast by economists.

Add to that a record number of foreclosures:

A record 2.8 million households were threatened with foreclosure last year, and that number is expected to rise this year as more unemployed and cash-strapped homeowners fall behind on their mortgages.

The number of households that received a foreclosure-related notice rose 21 percent from 2008, RealtyTrac Inc. reported Thursday. One in 45 homes were sent a filing, which includes default notices, scheduled foreclosure auctions and bank repossessions.

In December, more than 349,000 households, or one in 366 homes, were hit with a foreclosure-related notice. That represents a 14 percent spike from November and a 15 percent jump from December 2008.

Banks repossessed more than 92,000 homes, up 19 percent from November. That increase was likely due to lenders working to clear their books at the end of the year, RealtyTrac said.

And the looming dollar crisis:

The United States must soon raise taxes or cut government spending to curb its debt, and failure to act will risk a crippling dollar crisis as investor confidence ebbs, a panel of experts said on Wednesday.

“It has got to be done. It will be done some day. It may be done with enormous pain. Or it may be done more rationally,” said Rudolph Penner, a former head of the nonpartisan Congressional Budget office who co-chaired the 24-strong Committee on the Fiscal Future of the United States.

President Barack Obama’s administration will present his budget for fiscal 2011 early next month amid intense pressure to live up to election campaign promises not to raise taxes on middle class Americans, while confronting a record deficit.

As a result, Obama is expected to focus on long-term fiscal discipline, while maintaining policy support for an economic recovery in the near-term as the country rebuilds after its worst recession since the Great Depression.

And you can understand why I’m pessimistic about the chances for a meaningful economic recovery anytime soon. I’m sure there’s reasons for optimism, but I can’t find them. Everything I seen is pointing towards 1970s style stagnation.

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Commerce Department Revises 3rd Quater GDP Downward… Again

December 22, 2009 By Jeff Leave a Comment

Two months the media and Obama Administration were trumpeting the announcement that third quarter GDP had grown at an annualized rate of 3.5%. Unfortunately, their celebrations were a bit premature the Commerce Department today announced their final estimate of third quarter GDP… Not surprisingly third quarter GDP was a lot lower than they originally estimated:

Third-quarter GDP was originally estimated two months ago at a 3.5% annualized rate but was revised down to 2.8% growth in last month’s estimate. The revisions come from more complete data than was available at the first and second estimates.

The 2.2% revised growth rate is the strongest since the third quarter of 2007, just before the recession began.

Still, economists surveyed by MarketWatch had been expecting only a minor revision to 2.7% in the third estimate. See our complete economic calendar.

Economists are forecasting stronger growth — about 4% on an annualized basis — in the fourth quarter ending Dec. 31. They also see annualized growth of about 3% in the first half of 2010.

The revisions to third-quarter GDP were in three major areas: Business investment, consumer spending, and inventories.

Final sales increased at a 1.5% annual pace, revised from 2.5%. Gross domestic purchases — sales to U.S. residents — rose at a 3% annual rate, revised down from 4%.

The revisions shouldn’t surprise anyone, as Ed Morrissey notes the first-time home buyer tax credit and the Cash for Clunkers program accounted for roughly half of the original estimate of 3.5%. Assuming they still account for 1.5% of the final estimate that leaves a rather anemic 0.7% growth in the third quarter… That’s not a recovery, that’s life support!

James Pethokoukis has more on the political implications here.

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AP: What Recovery?

November 7, 2009 By Jeff Leave a Comment

The Associated press has been one of the President’s biggest cheerleaders but with unemployment now topping ten percent even they’re asking What recover?

Just when it was beginning to look a little better, the economy relapsed Friday with a return to double-digit unemployment for only the second time since World War II and warnings that next year will be even worse than previously thought.

The jobless rate rocketed to 10.2 percent in October, the highest since early 1983, dealing a psychological blow to Americans as they prepare holiday shopping lists. It was another worse-than-expected report casting a shadow over the struggling recovery.

President Barack Obama called it “a sobering number that underscores the economic challenges that lie ahead.” He signed a measure to extend unemployment benefits and to expand a tax credit for homebuyers.

Economists had not expected the 10 percent mark to come so quickly and immediately darkened their forecasts. Mark Zandi, chief economist at Moody’s Economy.com, and Joshua Shapiro, chief U.S. economist at MFR Inc., predicted the rate will peak at 11 percent by mid-2010. They earlier had projected 10.5 percent.

Unemployment at 11 percent would be a post-World War II record. Only once since then has joblessness hit double digits in the United States — from September 1982 to July 1983, topping out at 10.8 percent.

The article strikes fairly pessimistic tone in its reporting on the economy and accelerating pace of job losses. The only real quibble I have with it is that the economy hasn’t “relapsed”. Outside of small decline in July because of a statistical anomaly the unemployment rate has been rising steadily all year. In fact October’s month-over-month increase is the largest since May, and four times as large as the last monthly difference.

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Ouch: Unemployment Climbs to 10.2%

November 6, 2009 By Jeff Leave a Comment

Ouch, unemployment climbed to a 26 year high in October as as more than 558,000 Americans lost their jobs in October:

In another sign that workers are being left out of the budding economic recovery, the U.S. unemployment rate climbed to 10.2% in October, topping the 10% mark for the first time in 26 years.

Nonfarm payrolls dropped by a seasonally adjusted 190,000 in October, bringing to total number of jobs lost in the recession to 7.3 million, the Labor Department reported Friday. It was the 22nd straight monthly decline in payrolls.

Large losses were seen in manufacturing, construction and retai employment. Health care and temporary-help agencies added jobs. Read the full government report.

The October jobs report shows a growing disconnect between a recovery in economic output and continued job losses. The economy grew at a 3.2% annual rate in the third quarter, with productivity rising at a 9.5% rate.

“The grinding pace of progress in labor markets likely flags a tepid economic recovery,” wrote Sal Guatieri, an economist for BMO Capital Markets.

With unemployment remaining elevated and no sign of job growth, the Federal Reserve could be expected to keep its interest rate target at virtually zero, economists said. Read commentary on the Fed and jobs.

The jobs report was worse than expected. Economists surveyed by MarketWatch were forecasting a rise in the unemployment rate to 10%, with 150,000 lost payroll jobs. An upward revision to August and September payrolls cushioned some of the disappointment, however.

The current 10.2 percent unemployment rate is the highest since April 1993.

According to the Bureau of Labor Statistics 15.7 million Americans are unemployed, of those, 5.6 million, or 35.6% of the unemployed, have been out of work for more than six months… Representing another grim record. When you add in laid-off workers who have settled for part-time work or who have given up looking for work, the unemployment rate is 17.5 percent.

Regular readers know I’m a pessimist about the economy and I don’t anything in this month’s jobs report to change that… Jobs losses accelerated in manufacturing,  the average losses in the previous four months were 51,000 per month, but in October they climbed to 61,000 jobs lost.  Construction improved slightly loosing 62,000 jobs in October, down slightly from the 4-month average of 67,000. Finally, the retail sector lost 40,000 jobs last month – an indication that retailers are anticipating a weak a holiday season.

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Third Quarter GDP Rises to 3.5%… But…

October 29, 2009 By Jeff Leave a Comment

From Reuters:

The U.S. economy grew in the third quarter for the first time in more than a year as government stimulus helped lift consumer spending and home building, fueling an unexpectedly strong advance.

Signaling the end of the worst recession in 70 years, the Commerce Department on Thursday said the economy expanded at an annual rate of 3.5 percent in the July-September period, snapping four down quarters with its fastest growth pace since the third quarter of 2007 and exceeding forecasts for a 3.3 percent rate.

The good new is that the U.S. economy has stopped shrinking, the bad news is that all the growth was driven by emergency government programs like Cash for Clunkers and the $8000.00 first time home buyer tax credit. As Reuters Political Risk bloger James Pethokoukis points out when you strip out Cash for Clunkers 3rd quarter GDP was just 1.6 percent. If you  also strip out the slowing inventory cuts GDP was just 0.6 percent.

The bottom line is this, when you add in the sharp drop in new home sales and the barely there dip in first time jobless claims last week, the economy may be improving but has yet to turn the corner in any meaningful way. These numbers may be enough to make the Obama Administration look good for the next three months, but if they don’t stop these gimmicky programs and do something to spur real investment and create sustainable long term growth we’re headed for a double dip recession that they won’t be able to blame on the Bush Administration.

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