Economic Recovery Has Stalled, Recession in the Cards by Year End

Transcription

1 Economic Indicators to Watch for Signs of Recovery Economic Recovery Has Stalled, Recession in the Cards by Year End New York, NY Monday, June 27, 2011 Richard Yamarone Author of The Trader s Guide to Key Economic Indicators

2 Economy Isn t Advancing Fast Enough to Engender Job Creation Nonfarm Payrolls vs. Real GDP Payrolls ('000) GDP YOY% Payrolls GDP (Y/Y%) Source: BEA, BLS, Bloomberg '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '

3 Economy Operating Well Below its Potential Real GDP (Blns) vs. Real Potential GDP (Blns) $14,500 $13,500 $12,500 $11,500 $10,500 Potential GDP Real GDP $9,500 $8,500 $7,500 $6,500 Source: BEA, CBO, Bloomberg CBOPGDPR <Index>, GDP CHWG <Index> $5,

4 Employment To Be a Slow Train Coming Nonfarm Payroll Creation From Onset of Recession '73 - ' '81 - '82 '90 - ' '07 - current 90 Source: BLS, NBER, Bloomberg Months

5 Employment To Be a Slow Train Coming -- II peak-to-trough % jobs lost Recession Date (months) total jobs lost (millions) months to job restoration peak-to-trough Period AVG: Period AVG: Period (current) ? 6.03

6 No Hiring by the Private Sector Total Private Hires, (thousands) 5,500 5,000 4,500 4,000 3,500 HIREPRIV <Index> 3,

7 No Words to Express this Stat Average Duration of Unemployment in Weeks USDUMEAN <Index> Source: Bureau of Labor Statistics

8 Unemployment Benefits Headed in Wrong Direction Real GDP (Y/Y%) vs. Initial Jobless Claims 6 250, , , , , GDP CYOY <Index>, INJCJC <Index> Real GDP, LHS Initial Claims, (RHS) Source: Bureau of Economic Analysis, Dept. of Labor, Bloomberg '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 500, , , ,000

9 Trusted Street Indicator Signaled Double-Dip ECRI Weekly Leading Index Smoothed Growth Rate (%) Source: ECRI, Bloomberg ECRWGROW <Index> <GO>

10 Economy Set for An About-Face Leading Economic Indicators (Y/Y%) vs. Real GDP Growth (Y/Y%) GDP LEI GDP CYOY <Index> <GO>, LEI TOTL <Index> <GO> -4-6 Source: Bureau of Economic Analysis, The Conference Board '85 '95 '05-6

11 If GDP Dips to 2.0% -- It s Recession Time 14 Real GDP (Y/Y %) GDP CYOY <Index> -4 Source: NBER, BEA, Bloomberg

12 Robust Fed Index Points to Sub-Par Performance Chicago Fed National Activity Index Three Month Moving Average Source: Federal Reserve Bank of Chicago '90 '93 '96 '99 '02 '05 '08

13 Economic Deceleration Occurred During Early June 14,000 Weekly U.S. Rail Carloads -- Waste/Scrap 12,000 10,000 8,000 6,000 4,000 2,000 Source: Association of American Railroads, Bloomberg RAILWAST <Index> <GO>

14 ISM ISM & GDP Trends Diverging Real GDP (Y/Y%) vs. ISM PMI GDP GDP 40 ISM NAPMPMI <Index>, GDP CYOY <Index> -4 Source: ISM, Bureau Economic Analysis, Bloomberg

15 ISM Inventory-Orders Indicator Projects Recession ISM New Orders Index minus Inventories Index Recessions -15 Source: ISM, NBER, Bloomberg NAPMNEWO <Index>, NAPM ISNV <Index>

16 Manufacturing Gains Not Generating Jobs Industrial Production Index, Manufacturing Jobs ('000) 20, , , ,000 MFG Jobs (lhs) IP (rhs) 85 12,000 10,000 Source: Federal Reserve, Bureau of Labor Statistics, Bloomberg USMMMANU <Index>, IP <Index> ,

17 It s 1941 For Manufacturing 20,000 U.S. Manufacturing Employment (in thousands) 19,000 18,000 17,000 USMMMANU <Index> 16,000 15,000 14,000 13,000 12,000 Source: Bureau of Labor Statistics, Bloomberg 11,000 10,

18 Auto Industry a Fraction of Its Old Self Light Weight Vehicle Sales: Autos & Light Trucks 20 in millions Source: U.S. Dept. of Commerce; BEA, Bloomberg

19 Won t Get Any Jobs from Housing Residential Construction Spending ($ mls) Construction Employment (thousands) 700,000 8, ,000 7, ,000 Spending (lhs) Jobs (rhs) 7,000 6, ,000 6, ,000 5, ,000 USECTOT <Index>, CNSTRESI <Index> 5, ,000 Source: U.S. Department of Commerce, Bureau of Labor Statistics, Bloomberg 4, ,000

20 Housing Depression Continues Existing & New Home Sales New ('000, lhs) First-Time Home Buyer Credit Existing (mlns, rhs) ETSLTOTL <Index>, NHSLTOT <Index> Source: U.S. Department of Commerce, National Association of Realtors, Bloomberg

21 Home Prices Appear to be Flatlining S&P/Case Shiller Home Price Indices AZ-Phoenix 300 CA-Los Angeles CA-San Diego CA-San Francisco CO-Denver DC-Washington FL-Miami FL-Tampa GA-Atlanta 150 IL-Chicago MA-Boston 100 SPCS20 <Index> MI-Detroit MN-Minneapolis NC-Charlotte NV-Las Vegas 50 Source: Standard & Poor's, Bloomberg NY-New York OH-Cleveland OR-Portland TX-Dallas WA-Seattle

22 Commercial Construction Slump Total U.S. Commercial Construction Spending ($ mlns) $100,000 $90,000 $80,000 $70,000 $60,000 CNSTCOMM <Index> $50,000 $40,000 $30,000 Source: U.S. Census Bureau, Bloomberg $20,

23 Retailers Headed Out of the Malls Regional & Strip Mall Vacancies 12.0% 11.0% 10.0% Strip Mall Regional & Superregional Malls 9.0% 8.0% Source: Reis Inc. 7.0% 6.0% 5.0% 4.0%

24 Earnings/Analyst Conference Calls

25 Bloomberg Orange Book Summary of Commentary on Current Economic Conditions By Corporation NI ORANGEBOOK <GO> from earning statements commencing July 1, 2010

26 It Pays to Read those 200 Transcripts GDP 8.00 Fed Ex Total US Package Shipments (Y/Y%) vs. Real GDP (Y/Y%) Packages Real GDP Packages Source: Federal Express, Bureau of Economic Analysis

27 Small Businesses Drive the Economy Unemployment % NFIB Small Business Hire Plans Hire Plans USURTOT <Index>, SBOIHIRE <Index> Unemployment Rate (Inverted scale) NFIB Hiring Plans Source: NFIB, Bureau Labor Statistics '97 00 '03 '06 '09-12

28 State & Local Governments May be a Ticking Time Bomb State & Local Government Employment (in thousands) 14,800 14,600 14,400 14,200 14,000 13,800 13,600 Local (lhs) State (rhs) 5,250 5,200 5,150 5,100 5,050 5,000 4,950 4,900 13,400 13,200 13,000 Source: Bureau of Labor Statistics USEGSTSA <Index>, USEGLCSA <Index> ,850 4,800 4,750

29 Not Enough Fuel in the Tank Real Disposable Personal Incomes (Y/Y%) Source: BEA, Bloomberg PIDSDCWT <Index>

30 Not Enough Fuel in the Tank -- II Average Hourly Earnings: Total Private Industries, Production and Nonsupervisory Employees (Y/Y%) Source: Bureau of Labor Statistics, Bloomberg 1 USHEYOY <Index>

31 What Happens When the Stimulus Ends? Government Stimulus Driving Incomes Incomes in $ billions $10,500 $10,000 $9,500 $9,000 Real Dis Pers Incomes $8,500 PIDSCWT <Index>, PIDSPINX <Index> Real Incomes less Transfers $8,000 Source: BEA, Federal Reserve Bank of St. Louis, Bloomberg

32 Collapse In Credit Card Debt Consumer 'Revolving' Debt ($ billions) 1, CCOSREVL <Index> Source: Federal Reserve, Bloomberg 500 '99 '01 '03 '05 '07 '09 Jan-11

33 Persons Receiving Food Stamps at All-Time High Supplemental Nutrition Assistance Program Number of Participants 45,000,000 40,000,000 35,000,000 30,000,000 FDS PNUM <Index> Source: U.S.D.A, Bloomberg 25,000,000 Oct-06 Mar-07 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10

34 There is No Holy Grail of Economic Indicators

35 Fab Five Dining Out Spending: Meals at Other Eating Places (Y/Y%) RPCEDPMB <Index> <GO> -4 Source: Bureau Economic Analysis, NBER -6 '98 '01 '04 '07 '10

36 Fab Five Jewelry & Watches Spending: Jewelry & Watches Y/Y% RPCEDJRW <Index> <GO> Source: Bureau Economic Analysis, NBER '98 '01 '04 '07 '10

37 Fab Five Cosmetics & Perfumes Spending: Cosmetics & Perfumes (Y/Y%) RPCECOS <Index> <GO> -6 Source: Bureau Economic Analysis, NBER -9 '98 '01 '04 '07 '10

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39 Fab Five Women s Dresses Spending: Women's & Girls' Clothing (Y/Y%) RPCEDWGC <Index> <GO> -6-9 Source: Bureau Economic Analysis, NBER '98 '01 '04 '07 '10

40 Fab Five Casino Gambling Spending: Casino Gambling Y/Y% Source: Bureau Economic Analysis, NBER RPCEDCAS <Index> <GO> '98 '01 '04 '07 '10

41 Trade Helped During the Housing Bust, But No Longer Convincingly Contributor Contribution to GDP Residential Spending & Trade 4 3 Residential Trade GDP %NETX <Index>, GDP%RES <Index> Source: BEA -3.5 '06 QII QIII QIV '07 QII QIII QIV '08 QII QIII QIV '09 QII QIII QIV '10 QII QIII QIV '11

42 Money Not Entering Goods Market to Chase too Few Goods 900 C& I Loans Large Commercial Banks ($blns) ALCBLCID <Index> Source: Federal Reserve, Bloomberg

43 Inflation Not A Primary Concern Core Personal Consumption Expenditure Deflator (Y/Y%) PCE CYOY <Index> Source: BEA, Bloomberg

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