Spencer at Angry Bear, discussing yesterday's +0.9% increase in industrial production, produces an excellent graph comparing the increase in production since it bottomed last June with prior "minor" or "major" recessions, and calls this rebound "moderate":
Another way to look at it, however, is to remember
Lakshman Achuthan of ECRI's point that, in the long view, recoveries from recessions since WW2 have been less and less robust. Indeed, when you tally up Spencer's division of "minor" recessions(in regular type) and "major" ones (in bold), here's what you get:
1946
1954
1958
1960
1970
1974
1980
1981
1990
2000
So I continue to think that the best way to view this recovery in production is to compare it with the last V-shaped recovery (1983) and "jobless" recoveries (1992-3 and 2002-3). Seven months after the bottom of production, here is what they look like:
This recovery in production, unlike the two last "jobless" recoveries, is definitely V-shaped, looking very much like that of 1983.
Commenter Dragonchild has made an excellent point several times about how suppliers are stretching out deliveries rather than hiring new employees. In other words, they are "hoarding" jobs. I don't see how it can go on much longer. If there are 10 vendors in a market, surely 1 or 2 are going to figure out that they can grab market share this year by hiring at least new temporary workers and promising shorter delivery times. Once that happens, the other vendors almost have to match them, and the dam breaks.
So while this recovery has been "jobless" so far, because payrolls ex-November haven't been positive, that doesn't necessarily mean there isn't going to be a delayed V.
2 comments:
On a jobless claims note....the 52 week moving average of nonseasonally adjusted jobless claims continues to fall. It is now 545,215 5.5% off the High made on November 7th at 576,928. The best news in today's number's was in California. We now have all major states'52 week moving averages moving down in some state of decline.
Wow, a hat tip! I didn't think I'd live to see the day.
To get into the "lead time" scene in a little more detail, there's a "traffic jam" effect at work. You know how it takes only a single accident to bring a freeway to a grinding halt? It only takes a shortage of ONE part to stop a production line. This is why a lot of suppliers are able to get away with stretching their lead times for now. If any resource, component or service is in short supply and the nature of it prevents it from rebounding capacity quickly, then ALL suppliers are stuck in the same situation. So if supplier A and supplier B both buy widgets and the widgets are in critically short supply because they've been cleaned out, then even if A hired more workers, there's no competitive advantage. For increased operating costs, you just use up your existing inventory faster until you're in a "line stop" situation as you wait for more parts. This is why suppliers have been able to ignore purchasers' screams of outrage; they're all in the same boat.
NDD is correct that this can't go on forever. Purchasers are notoriously cheap bastards (they're PAID to be cheap bastards), but long lead times means more capital tied up in inventory. If a part takes 30 weeks to deliver, the OEM needs to buy up 30 weeks' worth of parts. That can be an awful lot of capital when we're still recovering from a liquidity trap. Also, you lose the flexibility to adapt to changing market conditions and can get soaked. Companies hate buying a pile of parts, only to sit on them for two years because sales slowed (even if they do well overall because another product line overperformed).
The "hoarding" of jobs is indeed happening and isn't something businesses are eager to proactively reverse in a time of uncertainty, but as for why there's pressure building up, what's killing the momentum on the ground level isn't a dam of collusion so much as a logjam in logistics. As fast and flexible as our economy is touted to be, the MBAs don't know squat about logistics. You can buy and sell companies so quickly today, but industry still moves like a freight train in slow motion.
Post a Comment