June housing starts add to evidence of Recovery's Imminence

This morning the Census Bureau reported that Housing Starts increased to 582,000 in June from May's upwardly revised 562,000. Year-over-Year starts are still down (-46.2%).

I'm unable to post graphs at the moment, but Calculated Risk has an excellent one, showing that housing starts are a leading indicator, always borttoming before the end of recessions. Note the recent strong turn-up in our current recession looks like the harbingers of recovery from past recessions.

The Deflationary Bust is Bottoming? June 2009 edition

This is a continuation of a monthly series that up until now has been called The Deflationary Bust Deepens. Each month I have been tracking the progress of this first full-fledged deflationary bust in over 50 years, comparing the progress of deflationary consumer and producer prices now with the pattern of the 5 deflationary busts between 1920-1950, including the Great Depression.

Yesterday morning the BLS reported that consumer inflation increased +0.7% (seasonally adjusted) in June, (rising 0.9% non-seasonally adjusted). Year-over-year prices have fallen - 1.4% (NSA) into deflation. YoY consumer deflation is only surpassed by 1949's -2.9% in the post-Depression era.

OIl, consumer spending, and the Recession

Back in April, I crunched retail and oil price numbers and concluded that the price of oil was responsible for over half of the changes in real retail spending in the last two years. As the price of oil continued to shoot higher, on June 2, after examining the role of China's hoarding in its burgeoning strategic oil reserve, and the hoarding going on at sea by oil companies and speculators, I wrote that

The State of the Economy, Independence Day 2009 (IV.)

Part I of this series can be found here.

Parts II and III of this series can be read at The Bonddad Blog.

IV. The Federal Government must intervene to Rescue the States, in a morally responsible way

By far, the biggest threat to a bottom being put in to this Recession, is the continuing drumbeat of new layoffs. Thursday's June employment figures over - 450,000 and new jobless claims that have stubbornly, week after week, remained above 600,000, put the kibosh on any idea that the bottom is already here. We simply cannot stand 600,000 people putting in for jobless benefits, week after week after week. And the source of the continuing drumbeat of jobs lost appears to be coming more from anywhere else from the location of what Paul Krugman has called the "50 little Hoovers", i.e., the state (and municipal) governments, which are obliged to balance their budgets and so must throw employees out of work and cut back on spending projects, exactly when they are needed most.

The State of the Economy, Independence Day 2009 (I.)

ABC News reported an interview with with Paul Krugman last week his opinions that:

"I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer," he said June 8 during a lecture in London.

However, Krugman argues people didn't listen to his entire speech, which included dire predictions about lingering unemployment. "There's a big difference between the end of a recession, which is really only when some things start to turn up, and the return to prosperity," Krugman told ABC News. "I think what people don't get is the difference between the end of a recession in a technical sense and actual recovery, which matters to people."

In my opinion, Krugman is exactly correct. In this four-part "Big Picture" look at the economy as of Independence Day 2009, I will argue that:

13 States Now Have 10% Unemployment

A picture is worth a thousands words, and this map shows the loss of a couple of hundreds of thousands of jobs. This map shows the current unemployment in each of the 50 states, and in 13 of them, that rate is above 10%.

At least in part, this map shows the immediate impact of the shutdown of much of the US auto industry. With most GM and Chrysler plants idled beginning in early may, a large number of parts suppliers have followed suit. As a consequence, the industrial region around the Great Lakes has seen unemployment jump to heights not seen since the late 1970s.

A Tale of Two Recessions, or Will the Dead Cat Bounce?

Dead–cat bounce (n): a brief and insignificant recovery (as of stock prices) after a steep decline, etymology, from the facetious notion that even a dead cat would bounce slightly if dropped from a sufficient height. First used 1985.

Source: Merriam Webster Dictionary

NAPM's Manufacturing Index suggests Recession bottom near

Last Friday the ISM Manufacturing Index for April was released. It was all but ignored in the economic blogosphere. It shouldn't have been.

Along with auto sales, it is one of the very first economic releases for the month of April. Also crucially, it is a leading economic indicator. The ISM Manufacturing index has typically bottomed a median 2.5 months (a mean of 4) before the end of post WW2 recessions. The latest it bottomed was the month of the end of the recession, the earliest 9 months.

In other words, this is an early indicator with a long and successful track record.

So, why does the NAPM's Manufacturing Index suggest the bottom of the recession is near ...?

Oil and Recovery

This may be the most important economic graph of the year:

Why? The above graph shows gasoline consumption in the US. The dotted blue line is April 2007-March 2008, the yellow line the remainder of 2008, and the chained red line this year's consumption.

Let us make a not unreasonable assumption that this recession is going to be somewhat "L" shaped or at least a Verizon-logo like elongated "V" with a very slow recovery after hitting bottom. Let's also assume optimistically that we are somewhere near the bottom of the cliff -- the inflection point of the "L" or "V".

How much of a recovery we get -- or worse, if we get a double-dip "W" recession -- is likely to be substantially determined by the price of Oil later this year.

2009: Recession vs. Recovery (Update 5)

Towards the end of last year, I wrote a number of posts about 2 possible scenarios for 2009: recession vs. recovery (although I noted that there could be a recession first, then a recovery). I used at least 4 different indicators to discuss what might happen.

Now that we are through with the first quarter of 2009, let's see what those indicators are showing.

recession