Monthly Archives: April 2012

Recession Measures – Updated

This post is the latest update to a series of blog posts seen on the CalculatedRisk.com blog.  The original blog post of April 12, 2010, is titled “Recession Measures.” In it, Bill discussed key measures that the NBER uses to determine recoveries, and posted four charts.

Here are those charts, updated in his April 29, 2012 post titled “Recovery Measures.”  The charts are constructed in a fashion different than most – in a “percent of peak” fashion.  As defined, “The following graphs are all constructed as a percent of the peak in each indicator.  This shows when the indicator has bottomed – and when the indicator has returned to the level of the previous peak.  If the indicator is at a new peak, the value is 100%.”  Periods of recession, as defined by the NBER, are shown as blue bars.

Here are the four charts, updated through the dates shown:

(click on images to enlarge)

Real Gross Domestic Product, above its pre-recession peak:

Real Personal Income Less Transfer Payments, still 4.2% below the pre-recession peak:

Industrial Production, still 4.1% below the pre-recession peak:

Payroll Employment, still 3.8% below the pre-recession peak:

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1403.36 as this post is written

The Velocity Of Money – Charts Updated Through April 27, 2012

Here are three charts from the St. Louis Fed depicting the velocity of money in terms of the MZM, M1 and M2 money supply measures.

All charts reflect quarterly data through the first quarter of 2012, and were last updated as of April 27, 2012.  As one can see, two of the three are at all-time lows:

Velocity of MZM Money Stock, current value = 1.434 :

Velocity of M1 Money Stock, current value = 6.966 :

Velocity of M2 Money Stock, current value = 1.582 :

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1403.36 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – April 27, 2012 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

The movement of the ECRI WLI and WLI, Gr. is particularly notable at this time, as ECRI publicly announced on September 30, 2011 that the U.S. was “tipping into recession,” and ECRI has reaffirmed that view since, with the most recent statement on March 15 (“Why Our Recession Call Stands.”)

Below is a long-term chart, on a weekly basis through the April 27 release (data through April 20 with current value of 124.1), of the ECRI WLI (defined at ECRI’s glossary) from Doug Short’s blog post of April 27 titled “ECRI Weekly Leading Indicator:  The Growth Index Slips Again” :

(click on charts to enlarge images)

This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI through the April 27 release (data through April 20):

This last chart depicts, on a long-term basis, the WLI, Gr. through the April 27 release (data through April 20):

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I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1403.36 as this post is written

St. Louis Financial Stress Index – April 26, 2012 Update

On March 28, 2011 I wrote a post (“The STLFSI“) about the  STLFSI (St. Louis Fed’s Financial Stress Index) which is supposed to measure stress in the financial system.  For reference purposes, the most recent chart is seen below.  This chart was last updated on April 26, incorporating data from 12-31-93 to 4-20-12 on a weekly basis.  The 4-20-12 value is .244 :

(click on chart to enlarge image)

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1399.98 as this post is written

Ben Bernanke’s April 25, 2012 Press Conference – Notable Aspects

On Wednesday, April 25, Ben Bernanke gave his scheduled press conference.

Here are Ben Bernanke’s comments I found most notable, in the order they appear in the transcript, although I don’t necessarily agree with them.  These comments are excerpted from the “Transcript of Chairman Bernanke’s Press Conference“(preliminary)(pdf) of April 25, 2012, with accompanying economic projections (pdf).

Bernanke’s responses as indicated to the various questions:

Thank you Mr. Chairman, Darren Gersh, Nightly Business Report: Some of your critics, I’m sure you’re not going to be surprised think that you’re still being too cautious that unemployment is still high, the economy may be slowing, inflation is subdued, but I know you just talked about the balance sheet. But given that, is the Committee now any closer to QE3 than it was at its last meeting?

Chairman Bernanke: Well first, the Committee has certainly been bold and aggressive in terms of easing monetary policy. We’ve maintained the Federal Funds Rate close to zero since late 2008. We’ve had two rounds of so-called quantitative easing. We’ve had a Maturity Extension Program which is ongoing. We have offered a guidance about the Federal Funds Rate that goes into at least late 2014. So we had been very accommodative and we remained prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target. So in particular, we will continue to assess, you
know, looking at the economic outlook, looking at the risk, whether or not unemployment is making sufficient progress towards this longer run, normal level, and whether inflation is remaining close to target.  And if appropriate and depending also on assessment of the costs and risks of additional policy actions, we are–remained entirely prepared to take additional balance sheet actions if necessary to achieve our objectives. So those tools remain very much on the table and we will not hesitate to use them should the economy require that additional support.

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Updates On Economic Indicators April 2012

Here is an update on various indicators that are supposed to predict and/or depict economic activity.  These indicators have been discussed in previous blog posts:

The April Chicago Fed National Activity Index (CFNAI)(pdf) updated as of April 26, 2012:

The USA TODAY/IHS Global Insight Economic Outlook Index:

An excerpt from the March 22 update titled “Index forecasts weaker growth” :

The February update of the USA TODAY/IHS Global Insight Economic Outlook Index shows real GDP growth, at a six-month annualized growth rate, increasing to 2.5% in March and April and then slowing to 2.1% in July. While employment, housing (mostly the multifamily sector) and consumer spending are slowly recovering, concerns about the Eurozone and world growth continue.

The ECRI WLI (Weekly Leading Index):

As of 4/20/12 the WLI was at 123.9 and the WLI, Gr. was at 1.2%.

A chart of the WLI, Gr. since 2000, from Doug Short’s blog of April 20 titled “ECRI Weekly Leading Indicator:  The Growth Index Slips” :

The Dow Jones ESI (Economic Sentiment Indicator):

no current value available

The Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Here is the latest chart, depicting 4-21-10 to 4-21-12:

 

The Conference Board Leading (LEI) and Coincident (CEI) Economic Indexes:

As per the April 19 release, the LEI was at 95.7 and the CEI was at 104.2 in March.

An excerpt from the April 19 release:

Says Ken Goldstein, economist at The Conference Board: “Despite relatively weak data on jobs, home building and output in the past month or two, the indicators signal continued economic momentum. We expect a gradual improvement in growth past the summer months.”

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1399.98 as this post is written

Durable Goods New Orders – Long-Term Charts Through March 2012

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, here are a few charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through March, last updated on April 25.  This March value is 202,568 ($ Millions) :

(click on charts to enlarge images)

Here is the chart depicting this measure on a Percentage Change from a Year Ago basis:

Lastly, a chart from Doug Short’s post of April 25 titled “Durable Goods Orders Fell 4.2 Percent: Far Below Expectations ” showing the Durable Goods New Orders vs. the S&P500′s monthly average of daily closes:

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1390.69 as this post is written

The Unemployment Situation Facing The United States

Part I: Introduction

This post, in five parts, will discuss the unemployment situation in the United States.

As a prelude, I am of the strong belief that the unemployment situation – and its underlying drivers has, and will, impact the entire U.S. population, not just those unemployed.  This impact will be experienced through an adverse combination of individual-specific factors including reduced employment prospects, reduced career advancement probabilities, and reduced compensation and benefits – not to mention an array of adverse macroeconomic factors that have, and will, impact the country’s economic situation as a whole.

A few disclaimers with regard to this post:

First, this unemployment aspect of our current economic situation is very complex.  This series of posts will present a summary discussion of the topic, as to avoid excessive complexity and length.

Second, the current and future unemployment situation varies widely among demographics, industries, and professions.  As such, while every employment situation is unique, there is enough commonality as to be able to generalize to some extent.

Third, the overall employment situation is, of course, dependent upon the overall economic environment.

Fourth, a precursor to this series of blog posts is the July 2009 series of five blog posts titled “Why Aren’t Companies Hiring?”, which discusses various aspects of the topic, many of which lack recognition.

Part 2:  What Is The Actual Unemployment Rate?

As this post is written, the official Unemployment Rate (U-3) is at 8.2%.

Some believe that the U-6 rate, currently at 14.5%, is a (closer) proxy of the actual unemployment rate.

Of course, there are other interpretations of the actual unemployment rate.  One is seen on the ShadowStats.com site’s Alternate Unemployment Charts page.  On this page, there is an interesting chart of what John Williams refers to as the “Alternate Unemployment Rate,” which he defines as:

The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.

The U-3 unemployment rate is the monthly headline number. The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.

Here is the accompanying chart, indicating the U-3, U-6 and his “SGS Alternate Unemployment Rate.”  One sees that there is a different trajectory for the SGS Alternate rate, currently at 22.2%,  vs. the official U-3 and U-6 rates:

I like to use these three unemployment rates – the U3, U6, and SGS Alternate Unemployment Rate –  as benchmarks;  they also  serve to (disconcertingly) illustrate how one concept, that of the unemployment rate, can have three vastly different values.

As to my belief of the actual unemployment rate, I think that the answer is conditional on many different factors, including – most importantly – how one chooses to define an “unemployed person.”  As well, I don’t believe that the framework and methodologies currently used to calculate the official unemployment rate are optimal.

Given my misgivings with the framework and methodologies currently utilized, I find it nebulous as to what exactly the actual unemployment rate may be.  However, from an “all things considered” standpoint, taking into account my definition of an “unemployed person”, the official unemployment statistics, an array of arguments supporting and refuting the validity of the official unemployment statistics, empirical data, etc.,  I surmise that the “actual” unemployment rate may well be above 20%, as suggested by the SGS Alternate Unemployment Rate.  Of course, if this is actually the case, it would be highly worrisome on a variety of fronts, and have vast implications.

Continue reading

Money Manager Forecasts – Notable Excerpts From Barron’s

The April 23 edition of Barron’s has a cover story titled “Reason To Cheer.”

The story contains the results of the “Spring 2012 Big Money Poll” and related commentary.

As described in the story:

THE BIG MONEY POLL is published twice yearly by Barron’s, in the spring and fall. The latest survey, prepared with the help of Beta Research in Syosset, N.Y., reflects the responses of 125 money managers nationwide. Some run small or mid-size investment firms, while others manage billions of dollars for banks, mutual-fund companies, endowments, and other institutions. The latest poll was mailed to participants in mid-March.

Included in the story are a variety of forecasts regarding the markets and economy.

I found a few of the statistics to be especially notable, including:

Only 14% of Big Money men and women identify themselves as bears these days, down from 17% last fall. The fence-sitters, or the neutral cohort, are holding steady at 31% of respondents. The bears’ mean prediction puts the Dow at 12,185 by December’s end and 11,738 by next June, the latter down 10% from current levels. In the skeptics’ view, the S&P 500 could revisit 1301 before falling to 1243, while the Nasdaq could tumble to 2693 by mid-2013 from 3000 now.

As well, in response to the question “Which is most likely to occur in the U.S. in the next 12 months?” , the most popular response from all of the respondents was “inflation” at 52%, followed by “None will occur” at 26%, “Stagflation” at 18% and “Deflation” at 4%.

As to the question “Will analysts raise, lower, or maintain their current 2012 consensus estimates for S&P500 profits?” 49% replied “lower”, 34% replied “raise”, and 17% said “maintain.”

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1364.77 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – April 20, 2012 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

The movement of the ECRI WLI and WLI, Gr. is particularly notable at this time, as ECRI publicly announced on September 30, 2011 that the U.S. was “tipping into recession,” and ECRI has reaffirmed that view since, with the most recent statement on March 15 (“Why Our Recession Call Stands.”)

Below is a long-term chart, on a weekly basis through the April 20 release (data through April 13 with current value of 123.9), of the ECRI WLI (defined at ECRI’s glossary) from Doug Short’s blog post of April 20 titled “ECRI Weekly Leading Indicator:  The Growth Index Slips” :

(click on charts to enlarge images)

This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI through the April 20 release (data through April 13):

This last chart depicts, on a long-term basis, the WLI, Gr. through the April 20 release (data through April 13):

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1378.53 as this post is written