- by New Deal democrat
Since Bonddad hasn't posted on this (yet), allow me to make a few comments:
1. 500,000 new jobless claims is bad. No doubt about it. Since it is a "short" leading indicator, this just adds more confirmation that 3rd quarter GDP will be roughly zero, and could easily be negative.
2. It also means that nonfarm payrolls for August will probably stink as well. The "breakeven" point between non-census gains and losses this year has been about 475,000-480,000.
BUT... We don't know what sectors the new claims are coming from.
3. The census is laying off workers more quickly than most thought. By August 7, they were down to 75,000 employees. About 500,000 census workers have been laid off in the last 13 weeks, and some of them depending on the state qualify for unemployment benefits. This will be almost over in a few weeks.
4. The Congressional aid package to the states was not big enough and it was late. We are now at the weeks when thousands of schoolteachers nationwide are finding out that they are unemployed, and you can bet that nearly 100% of them are filing for benefits. This too will probably tail off once September begins.
5. We are down about 100,000 housing starts since April. Construction workers and real estate sector finance workers have already suffered layoffs. Whether those will abate or not is unknown, but they certainly came quicker than was the case in 2006-07.
6. BP has been laying off cleanup workers in the Gulf states. This is obviously temporary too.
If the increased layoffs remain concentrated in the census and in areas where the stimulus expiration has hit, there will be a reversal in September. The real danger is whether the sectors laying people off have expanded beyond that. We won't know that till the August jobs report in two weeks.
In that regard, if you want to be worried, worry about the negative Philly Fed report this morning. If outright weakness is spreading to manufacturing, that is an ill omen indeed.
Currency Wars Part II: Jim Rickards and Max Keiser
36 minutes ago
6 comments:
Not that I totally disagree with you but for us to get zero Real GDP
growth where do you think the weakness will come from flat consumption spending or continued
subtractions from Net exports?? or elsewhere....
Outright weakness has spread to manufacturing; the Philly Fed came in at -7.7 on a prediction of +7.0. Last month the Chicago Fed fell almost a full point to -0.62. The New York Fed was up slightly to 7.1 from 5.1 on a prediction of 8.0. Keep those waffle cones ready if you believe we've been in a recovery.
Looks like negative GDP growth for at least one quarter is now very possible. I've never been as optimistic about the economy as Bonddad because the 2008-09 recession was a balance sheet recession caused by a financial crisis. The last time we had that type of economic downturn was The Great Depression. Pretty much all of the economic decision makers during The Great Depression (for example, investors, CEO
s, bankers, stockbrokers and even heads of households) are now dead so very few people have experienced a balance sheet recession. Thus, they mistakenly view this recession as just another recession, albeit a bad recession.
It's going to take time for businesses, individuals and families to pay down their debt. Thus, its going to take a long time before the economy takes off again. Until debts are paid off, the economy is going to be very vulnerable to negative shocks to the economy. Today's report suggest that we now have better than even odds for a double dip recession. Unfortunately, this could mean Republican control of the full government in 2012, which I fear could lead to the Second Great Depression. However, demographic changes should lead to an easing of the unemployment problem later this decade.
brodero: Honest answer, I'm not sure. But the signs are there.
olephart: I have to disagree with you about the Chicago Fed. Here's their own definition of the index:
"A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth."
So their last reading, is growth, just below trend. Empire State still shows growth as well, just not as strong as before.
esong: although you frame your comment as disagreement, generally I agree with you. I have always used recovery to mean "improvement off the bottom", and we certainly have had that, and in many ways it has been stronger than either of the last two (and special note to our favorite troll whose insulting comments to every post are routinely deleted by the owner of this blog: manufacturing has had a V-shaped recovery, which is the only such V-shape I subscribed to. Deal with it).
Since no FDR-like cavalry is coming to the rescue, the long term solution will only come when enough savings have been accumulated and enough debt paid down, coupled with pent-up demand, cause an outpouring of new, sustainable spending. Note that the accumulation of savings and paying down of debt have been occurring at a rapid pace, although I suspect they have about 2 more years to go.
NDD, thanks for the reply. I agree that one data point doesn't create a trend but I was disheartened by the magnitude of the turn around in the Chicago Fed. Two months below -0.75 will put the MA3 on recession watch. The Philly Fed is trending downward. This soft spot could turn into the Okefenokee Swamp and our Republican friends are doing everything they can to collapse the economy.
Being worried now while the ECRI, credit spreads, leading indicators, consumers trends et al. warned us a while back, weirdly, could produce the same results as being worried before. The S&P hasn't made a huge plunge yet and their is still time to position oneself for a double dip and then to protect oneself from a non double dip.
Let's not forget that jobless claims is a lagging/coincident indicator and that it's simply confirming what the WLI and the housing sector said way way before. Even Greenspan told us there would be a double dip in a Bloomberg interview.
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