Friday, August 7, 2009

LEI #4: July Manufacturing hours worked up strongly

- by New Deal democrat

This morning we got the 4th of 4 readings of Leading Economic Indicators this week. In July, average hours worked in manufacturing increased 0.3 hours to 39.8 hours. This is a very positive reading, indicating that manufacturing is beginning a robust recovery (by contrast, last autumn during the collapse hours were declining as much as -0.3/month).

This means that all 4 readings of LEI's this week have been strongly positive:
- on Monday, the ISM manufacturing index showed economic expansion in new orders and deliveries.
- on Wednesday, nondurable (consumer) goods new orders increased a strong 2.7%, to the highest reading in over half a year.
- on Thursday, initial jobless claims declined to 550,000 the second lowest reading in over 6 months, and a data point completely unaffected by the "noise" about early auto plant shutdowns.
- today, hours worked in manufacturing likewise increased to the strongest reading in the last 6 months.

I will follow up later with a post on what the July reading for the aggregate LEI's is likely to be, but suffice it to say, this week's grand slam of strongly positive leading data bodes very well for a return to positive economic growth in the next 3 months.


In addition to the -247,000 loss of jobs in July (still the best reading in 11 months), which confirms the trend towards job gains in the next few months, the aggregate total hours worked in private industry in July held even (0.0). This is important since it, like nonfarm payrolls, is a coincident indicator used by at least one member of the NBER to delineate the end of recessions.

Update: Oh, and amid all the good news, I forgot to add that the unemployment rate actually dropped 0.1 to 9.4%.
A blowout good report!