Wednesday, August 05, 2009
trimtabs on employment
“The personal income report the Bureau of Economic Analysis released Tuesday contained huge downward revisions to wage and salary growth,” said Biderman. “Now that the BEA is using unemployment insurance reports from the first quarter to estimate current wage and salary growth, its data confirms what we have been reporting for months.”
The BEA’s estimates of wages and salary growth changed from year-over-year declines of 0.8% in April and 1.1% in May to year-over-year declines of 4.0% in April and 4.2% in May. Also, the BEA reported that wages and salaries dropped even more sharply in June, falling 4.7% year-over-year.
“Two months ago, we asked BEA economists how they reconciled the huge declines in real-time tax deposits with their report of a modest decline in wages and salaries,” said Biderman. “They could not answer our question. We know now that by ignoring real-time data, the BEA was providing an inaccurate view of the economy’s health.”
this perhaps helps to explain the continuing softening of econometrics, not to mention surprisingly soft deposit growth among commercial banks in spite of increasing savings rates. calculated risk takes on today' comments from proctor & gamble as well as the non-manufacturing ISM.
[T]he ISM non-manufacturing numbers this morning and the P&G numbers matter. Away from auto sales, it is hard to find much evidence of a pick up in consumer demand.
I've seen some argue for a business led recovery. That is the wrong order. Sure, there will probably be some inventory replenishment since some companies probably cut back too far, but most companies already have too much capacity, so after the inventory adjustement what will happen? They will not need to expand until their sales pick up significantly.
So I still think the keys are Residential Investment (RI) and PCE, and therefore I think the recovery will be sluggish. Note that CRE and non-residential investment in structures is a lagging indicator for the economy.
the idea of a business-led recovery amid 65% capacity utilization is something i find hilarious. there's no doubt that the real elements of the leading economic indicators are reviving a bit, giving weakly positive contributions to the LEI over the last quarter. the harder question to answer is, "what does that represent?" -- and i'm of the belief that the pickup in manufacturing activity amounts to channel stuffing following an epic first quarter shutdown. we are continuing to see little to no evidence of a pickup in consumer demand, while -- as inventories decline -- inventory-to-sales remains near cycle highs and very far indeed from the levels which globalized industry honed (and levered) to just-in-time delivery can profitably tolerate.
i admire edward harrison of crdit writedowns immensely, and his analysis of employment trends is valuable. he shows the ISM manufacturing report to be indicating near-recovery.
Given this data and other recent bullish economic reports, don’t be surprised if Q3 GDP change prints a positive number. If it does, it is very likely that the recession is all but over right now. Mind you, I still am talking about a weak Q4 or Q1 2010 recovery and possible double dip. But, I am aware that it is mostly upside economic risk that is apparent in the US. The data cannot be ignored. And right now, it is very bullish.
that double-dip, with a middle "expansion" consisting entirely of channel stuffing and government stimulus, looks fairly probable to me. whether or not third quarter GDP prints positive is immaterial on the longer view, in my opinion. a not-entirely-useless analogy might be the landing one sometimes finds between floors in a long flights of stairs -- less the end of the decline than a pause in it.
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