Monday, July 11, 2011

Economic Week in Review

Let's take a look at the various economic reports that came out last week, organizing them into the categories used in the Beige Book survey.
Consumer: the big news here was the employment report, which was terrible (my friends at the Liscio Report called in "unspinningly bad). A gain of 18,000 jobs that will probably be lowered in the coming months to a gain of 0 or slight loss. There was nothing good in this report: wages dropped, the unemployment rate increased and we had a deeply concerning spike in the number of short-term unemployed. At a time when the consumer is already slowing his spending, this is the worst possible report, plain and simple. Interestingly enough, consumer credit increased last month, propelled higher by a 5.1% increase in revolving credit (credit card debt).

Manufacturing: factory orders increased .8% in May, which is a rebound from the drop of .9% in April. While the news stories touted the increase as a sign that fallout from Japan was lessening, I'd wait a few months before we make that call. We've seen a drop across a variety of countries in manufacturing, leading me to have concerns about the overall economic direction.

Services: The ISM services index printed at 53,3, which is down from 54.6 the previous month. Both the production and new orders components dropped, indicating the overall pace is slowing. Although 15 industry areas were increasing, the anecdotal quips were mixed. Overall, this area of the economy is still growing, but there is some erosion around the edges.

The employment report was a terrible report, and dominated the news. It indicates the recovery is in serious danger.