December 04, 2011
Current economic conditions
The U.S. economy experienced disappointingly weak growth in the third quarter. Data coming in during the last week suggest that the fourth quarter is starting out a little better. But it doesn't look to me as much better as some accounts in the financial press might lead you to believe.
Auto sales would be a key factor in a normal economic recovery. November light vehicle sales were a little below values for October, but 14% above November 2010. In each of the last 3 years (though not so much in the 4 years before that), sales fell more substantially from October to November, so standard seasonal adjustment procedures report a seasonally adjusted figure for this November that might appear somewhat more encouraging. But note that last month's sales are still 16% below the average values seen for November during 2004-2007.
Improvement was also observed in the ISM manufacturing survey, whose index rose from 50.8 for October to 52.7 for November. A value above 50 indicates that the number of facilities reporting improving conditions outnumbered those reporting decline. The ISM measure implies that manufacturing has been growing all year, with the pace of growth picking up in November. The problem is we usually expect to see growth, not stagnation. A value of 53.3 is the historical median for the manufacturing PMI, and the November reading is a little below that. The only reason the latest report sounds encouraging is because the previous 4 months had been even further below average.
And we ended the week with an employment report that could have been worse. According to the BLS survey of establishments, there were 120,000 more Americans working (on a seasonally adjusted basis) in November than in October, and the gain would have been 140,000 had it not been for the ongoing declines in the number of people employed by state and local governments. More encouraging was the 278,000 estimated gain reported in the BLS's separate survey of households. The two surveys are in broader agreement if you look at 12-month averages. We see an average employment gain over the last year of 133,000 per month from the establishment numbers and 139,000 per month from the household. Those are the sort of numbers that just keep pace with the growing population, and really don't make much progress in reducing the size of the army of unemployed U.S. workers. True, the unemployment rate (derived from the household survey) has fallen from 9.8% a year ago to 8.6% last month. But the biggest single factor in that has been the growing number of Americans who are now characterized as "not in the labor force." Each month over the last year, on average America has added 149,000 new people over 16 who are not working and not actively looking for work. In other words, the number of American adults who are "not in the labor force" is growing faster than the number who actually have jobs.
Hence the summary with which I started-- things are looking a little better, but not a whole lot.
Posted by James Hamilton at December 4, 2011 07:39 AMdigg this | reddit
I kind of expect vehicle sales to pick up this winter as more older cars have problems.
Posted by: aaron at December 4, 2011 08:23 AM
During the Bush presidency, much was made about zero job growth for the for the first few years. But the household survey had shown growth. Than the establishment survey numbers were revised to something closed to the original household survey numbers.
A similar pattern has occurred the past few months, the household survey has shown substantially larger gains. And there have been fairly sizable (as a % anyways) upward revisions of the establishment survey.
Is the household survey in some ways more accurate during recoveries?
It would be neat if the FRED database would let you look at the first estimates for prior years, instead of just the much-revised numbers.
Posted by: Bob_in_MA at December 4, 2011 12:46 PM
Your thoughts re; $7.7 T lent by the Fed would be most appreciated. It does not take much effort to locae the Jon Stewart analysis.
Posted by: rob at December 4, 2011 03:51 PM
I find it interesting that very few folks who look at the employment report discuss the revisions.
Back in August and September, so many talking head economists and bloggers were having severe trauma over a 0 report for July and 70k (or so) for Aug. 0 didn't even make the least bit of common sense much less economic sense.
Many came out and said we were already in a recession. Many others said we would be in one by now.
Yet, only a few months later, the revisions show a much stronger job market than orignally thought. I believe the revisions take the Sept number over 200,000. Yet Mr. Chin says was a dissapointly weak 3rd quarter we had?
Granted Q3 wasn't stellar, but it sure looks better than initially considered.
Posted by: Rob at December 5, 2011 04:59 AM
Sometimes it is educative to go back to the grimoires and to compare with actual as a perspective (Recent Corporate Profits in the United States
Copyright 1934, National Bureau of Economic Re.rcarch, Inc.) SOLOMON FABRICANT
Sketchy and incomplete is this comment and certainly worth to be expanded on a micro standpoint (government savings,households,corporate,comparative indebtness for the three categories).Total aggregated profits in 1927 to 1930 were positive (table 2) with a trend rupture occurring in 1931-1932 The largest the corporations,the more immune to a negative profitability when neglecting the debts.
Reading an economy through the pulse of the Dow and SP,CAC etc may be misleading.
The above study does make any reference to the banks profits and to their veracity.
Posted by: ppcm at December 5, 2011 07:30 AM
If growth continues, and has persisted, at 2010 rates, we should be back at 2007 levels by the end of 2012. We may not be there nominally, due to the drop in asset/financial values, but our productive activity will be.
At a per capita level is another question.
Posted by: aaron at December 5, 2011 10:31 AM
To Bob_in_MA: Alfred has the vintage, real-time data histories that you want to see. For example, the nonfarm payroll history is there.
Posted by: MDueker at December 5, 2011 11:27 AM
I hate quoting Zero Hedge, but:
"John Lohman's chart below shows that in 2011 initial and continuing claims have been revised higher the week following 91% and 100% of the time, respectively. A purely statistical explanation for this phenomenon is "impossible"."
Verifiable data like that is disheartening for anyone who wants to believe they get the real data when it becomes available.
Posted by: Anonymous at December 5, 2011 04:37 PM
I feel tin foil hat like...
Posted by: rob at December 5, 2011 05:08 PM
Part of this relates to Menzie's pictures of export growth, an artifact of Ben's QE that depressed the dollar. The help to the U.S. economy is nice, but I fear the added stress to the euro area will render the policy shortsighted (harmful in the longer run).
Posted by: don at December 6, 2011 10:30 AM