My Weekly Indicator column is an excellent way of marking opinions to market, or reality. Instead of a snapshot from one or two months ago, or even the last quarter, weekly indicators are fully up to date.
On Saturday I concluded my Weekly Indicator piece with the following: "The NBER dating committee is known to watch at least 5 indicators: nonfarm payrolls, aggregate hours worked, industrial production, real retail sales, and real income. Two of these have now turned negative, one is flat, and two remain positive. Should the negative trends continue - and I emphasize that there is no guarantee that they will - at some point the NBER could date a new recession from this month, September 2011."
Let's look at the most current data on the 5 series mentioned above:
Real retail sales turned down in July and August. This almost has to be laid at the shattering effect of the debt ceiling debacle on consumer confidence, although the lagged effect of increasing gas prices documented by Prof. James Hamilton probably also played a role:
At least one of the members of the committee is known to look at aggregate hours worked. These declined in August:
Nonfarm payrolls is perhaps the single quintessential indicator of turning points. After 3 pathetically positive months, zero jobs were added in August:
Despite contracting regional manufacturing reports, and just barely positive ISM manufacturing reports, Industrial Production continues to increase:
Finally, real income is also still increasing:
Through July, the data do not support recession. August income will not be reported for another week.
I want to emphasize that there is absolutely no validity to simply projecting declining trends forward. Hence the crucial qualifier of IF those trends do continue, and if second derivative declines in payrolls and income translate into actual declines. We had declines in several of these indicators in 2006 and 2007 for exmaple without tipping into recession.
