As NDD noted, there is a ton of data out today. In addition, over the last week, we've seen some really terrible statistics come out of the BRIC's and other economies. This is a post that will keep track of the data as it comes out.
First, before we get to the US report, consider these data points from the developing world.
India's GDP slows to 5.3%. Yes, this is still far higher than the US'. However, with over a billion people, India has to keep a break neck pace of growth alive simply to keep up with population growth. This number is too low to allow that to happen. Yesterday's linkfest has links to three articles on India from Economonitor that provide a really good comprehensive overview of what is happening there.
US GDP was revised down from 2.2% to 1.9% yesterday. While we're still growing, we certainly aren't making any records.
China's factory output is weakening.
Brazil lowered it's interest rates by 50BP on Wednesday, largely because it's growth is coming in just above 1%.
In short, the BRIC's are slowing down sharply. Here's the essential issue: China has powered its growth by becoming the manufacturing center of the world. This has fueled the growth of material exporting countries such as Brazil and Australia. Now China is looking to move away from that model to one more centered on consumer spending. That will have negative impacts on the previously listed countries.
US employment report BLOWS: +69,000 with an unchanged unemployment rate.
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UPDATE: NDD here with details of the blow-iness:
I see just a few rays of sunshine in the storm:
- (1) temporary services, a leading indicator, grew by a grand total of 1,700 jobs;
- (2) the employment to population ratio rose 0.2% to 63.8%, as 642,000 people entered the workforce, more than reversing last month's decline. As an aside, I wonder if permabears will acknowledge that this is why the unemployment rate rose 0.1% to 8.2% -- yeah, probably not;
- (3) the YoY growth rate in employment rose by 15,000 (pending revisions);
- (4) some of the weakness is seasonally adjusted construction employment, which rose 43,000 during the winter (seasonally adjusted) and has now given it back. This is probably an anomoly due to the non-winter winter.
- (5) manufacturing employment continued to grow, up 12,000
Everything else stunk, and frankly, these look like the kind of numbers I would expect to see a few months before a recession begins (but too late for ECRI to be correct). Here are the details:
March and April were revised down. April now shows only 77,000 jobs added. This is what I would expect to happen heading into a recession.
The manufacturing workweek, a leading indicator, declined 0.3 hours.
Factory overtime declined.
The number of people unemployed for 0 to 5 weeks rose again, by 37,000. This is a more timely leading indicator than initial claims.
The unemployment rate rose 0.1% to 8.2%. The broad U-6 unemployment rate rose from 14.5% to 14.8%.
Aggregate hours worked was unchanged. This is a coincident indicator which may form part of the NBER's recession criteria.
Average hourly income rose only 0.1%, or two cents, to $23.41. This is pathetic.
In summary, the coincident parts of the report stunk, but were still positive. Most of the leading indicators in the report turned negative. This was a bad report.
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Okay, now that you are thoroughly depressed, let's briefly discuss the personal income and spending report, which was better.
Real disposable personal income rose 0.2% in April. Spending rose 0.3%, and so the savings rate declined 0.1% to 3.4%. It looks like real personal income after transfer payments also rose. This is one of the four coincident indicators used by the NBER in making their recession calls.
The good news is that the YoY decline in real income is abating, and could turn positive in a month or two. That would alleviate at least one worry.
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UPDATE 2. NDD again....
The ISM manufacturing index for May decreased slightly to 53.5, which still shows expansion. The new orders component, which has just been added to the LEI, increased to 60.1. This is an excellent number and in line with a strongly expanding economy for the last 30 years. Interestingly, the subindex taken out of the LEI, supplier deliveries and the backlog of orders, actually contracted.
Mixed, but almost all positive in various degrees.
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Next, construction spending for April. This increased 0.3% from March, which was revised higher from +0.1% to 0.3%. Overall private construction rose 1.2% month over month, while public construction (thank you Austerians) shrank by -1.4%.
Within private construction, nonresidential (e.g., office, warehouse, stores etc.) contracted slightly, down -0.2% month over month.
But the star of the show was private residential construction, up 2.8% month over month. This is housing, folks. Here we are in 2012, and housing is the most improving sector of the economy. Hoocoodanode!!!
Bonddad here:
A commenter recently noted that there is clearly a negative impact coming from the rest of the world, hitting the US. I completely agree with this sentiment. As I've noted for about the last month in the market analysis section, equity markets around the globe are dropping; safe assets are rallying (US, German and UK bonds, US dollar and Japanese yen), commodities are dropping. This is the exact scenario you would expect in a pre-recession trading environment. While I don't think we're in a recession yet, we are getting dangerously close.
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NDD again:
Auto sales came in at 13.8 million annualized. This is the lowest reading this calendar year, and mirrors the stall in auto sales that took place exactly one year ago. One year ago at least part of the reason was a parts shortage due to the earthquake and tsunami in Japan. There's no such excuse this year.
Hopefully with gas prices falling, YoY consumer income will catch up and the profound weakness in some of the numbers we got today will pass. We'll continue to pick through the entrails in the coming week.
Thursday Watch
1 hour ago
6 comments:
The employment report suggests that a new recession is a real possibility, especially in 2013 when austerity measures take place. I believe a recession will be made worse by a President Romney, whose chances of election is rising as disappointing job reports are followed by more disappointing job reports.
However, there are reasons to remain hopeful. Over the past three years we've always bounced back from a spring slump. My conjecture is that the root problem of the spring slump is speculation in the oil market. We always enter the new year being hopeful and speculators drive the price of West Texas Oil past $100 per barrel. According to oil analysts, sustained oil prices above about $95 per barrel leads to recession. This high oil prices causes a spring slowdown which over the last three years has caused oil prices to collapse just in time to avoid a recession. I suspect this will happen again. Unfortunately, Obama is running out of runway in order to win reelection. The econony has to lift off very soon or else Romney will be president.
One final note. The Eurozone debt crisis may be a blessing in disquise. Mainstream analysts believe that the Eurozone debt crisis will lead to economic collapse in the United States,and certainly a slow down in the US economy. However, I'm not sure this is totally true. Although the debt crisis has caused net exports in the US to fall, which reduces economic growth, it has also prevented oil prices from surging to $50 per barrel. It might be possible that the Eurozone crisis is preventing a US recession. My view is certainly a minority view, but I think its worth thinking about.
I mean $150 per barrel.
We are already witnessing a kind of systemic contagion within the Eurozone. Most of pundits barely mention it in the papers. Ireland, Portugal, Greece and now Spain. Who’s next? I bet Italy… With a noticeable slowdown of growth in the BRICs and to a lesser degree in the USA, I cannot see barely a rebound in the equity in the next 12 month to come! Time to switch to bonds or other safe assets…
With 10-year treasury bonds yielding below 1.5 percent, below the inflation rate, that's something tough swallow. A few years ago, you could open a savings account with a five percent interest rate. I wouldn't invest in long term bonds. Real estate could be a bargain, but because of the housing bubble, I don't see great rebound in housing for some time to come.
We've seen the economy go into a soft patch every time this time of the year during the Obama presidency, and every time this time of year, the European debt crisis explodes, which in turn sink oil prices. This is why I conjecture that the Eurozone crisis has been a blessing in disguise and may continue to be so as long as this doesn't cause a run on US banks.
Seems to me to be a little over reaction on Wall Street today. With temp employment trending upward, auto sales trending upward, housing bottoming, strong construction spending, these all bode well for better employment in the months ahead, do they not?
Also, why is the household survey shunned in these reports?
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