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Thursday, April 23, 2009


unemployment hints at moderating slowdown

this isn't new news for those reading about green shoots, but ed harrison takes on the weekly unemployment report.

Average Initial Claims are trending down, both for seasonally adjusted numbers and for unadjusted numbers. Comparisons to last year continue to trend down as well, with the worst comparison for unadjusted numbers having been a full three months ago. To me, this suggests that the worst of the carnage in the jobs market for this cycle is behind us. Mind you, the numbers do show continued weakness for unemployment that I see lasting well into 2010, but I am not convinced that the ravages of unemployment will continue to work against consumer spending.

Paul Kasriel and Asha Bangalore of Northern Trust say:

It is likely that real consumer spending grew in the first quarter of this year after having contracted in the third and fourth quarters of last year. At least, this is what the behavior of “real” retail sales is suggesting. When nominal retail sales data are deflated by the CPI for goods, the quarterly average of this proxy for real retail sales grew at an annual rate of 2.5% in the first quarter of this year after having contracted in each of the five preceding quarters (see Chart 4). Although both nominal and “real” retail sales fell in March, there has been a rebound in same-store nominal chain-store sales in the three weeks ended April 11 (see Chart 5). The weak showing for retail sales in March and the apparent rebound in late-March – early-April might be related to the relatively late Easter holiday this year.

Mind you, they are NOT saying we are about to see an imminent recovery. However, they do believe that the worst is behind us (for this cycle) and hat GDP may turn positive as early as Q4 2008.

if you're wondering what green shoots look like on a chart, this is kasriel's citation of the chicago fed's national activity index, a broad weighted leading economic indicator index.

moving beyond the state of absolute economic freefall that was evident at times in 4q08 and 1q09 is a positive to be sure, and should perhaps not unreasonably be expected given the amount of government support that has been sunk into both the financial system and consumer demand via fiscal stimulus. furthermore, this vicious cyclical recession will end.

but complacency remains a significant danger. for so long as the loan component of bank balance sheets are downsizing, in conjunction with household liabilities, the economy is likely to remain dependent on government assistance.


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