Friday, September 5, 2008

Curiouser and curiouser

I am struck in August that so many measures ADP, ISMs, Challenger, Jobless claims nonfarm and Household reports are giving off such different readings.

To me when these measures are pointing in different directions I get the feeling that trend is not fixed. It’s like sampling cake batter that has not been mixed to the point of homogeneity. You can sample different spots in the bowl but you’ll get no sense of what it is unless you wait for it to mix more completely.

I’m not sure what to make of August. I had looked for a drop of 100K. So it was my consolidated gut feeling that things were weakening. The ADP report was very bad guidance this month. But it has been an odd recession. And the job loss patterns are peculiar but persistent. And the persistence can’t be ignored. It’s a different sort of recession that grips a slower growing economy with an aging population. The jump in claims m/m was telling. The next two month rise in the ISMs’ employment barometers is odd. But announced corporate layoffs are accelerating again and it’s more than just seasonal. I think things are getting weaker.

The improvement (slight) in consumer confidence is all lower energy prices.

Compared to past recessions this like some other one’s though no one seems to want to admit it. Job losses in 1969 and 1973 at this mark (9-mos after recession start) were even lighter. But in 1973-75 we were on the verge of a collapse in jobs.

I don’t see that repeating but I agree that the economy is getting weaker. Consumers have fewer untapped resources. Service sector job losses are steady and there must be more to come in financial services. I think the rise in participation rates is out of desperation for more income instead increased participation in an improving job market. The rise in the spouse-present unemployment rates is bad news. If the U-rate is this bad, the job numbers will probably follow. Already the retail sector cyclical performance is among the worst (among past recessions) for job losses.

So that is what I can add from the stuff that I watch.

As you know the dynamics looking ahead are poor. Foreign growth is looking terrible the OECD cyclically adjusted LEIs are still weak and weakening. On Thurs and Friday Germany reported horrifically weaker industrial orders and IP. The ECB is tightening up on collateral acceptance- probably overdo - but it won’t help growth in Europe where matters are increasingly grim. Asia is adversely affected. Taiwan is planning a stimulus package…

Back at the ranch, as we say, the slowing job losses in construction are the ‘bright spot’ but hardly a dominant feature. Wage trends are still good, but I’d not want to bet on that continuing. The services and MFG sector weakness looks real; surely FIRE job losses are going to get worse? Fed’s hands seem tied. Inflation has not behaved. Admin wants no part of new stimulus. Energy prices could drop a bit more but I’m betting that’s too little too late. The hurricane season will keep energy prices on edge at least.

So August? Ah yes we are heading into the autumn of the expansion…well in my view already crossed that line.

If August is not a turning point, it’s another point on the way to weaker 2008. I wonder how the FOMC projections will change and what it will mean now that its unemployment ‘forecast’ has been blown out of the water for 2008?

When its all said and done this is recession. It looks nothing like any soft landing we ever had and a lot like past recessions in various respects. At some point that will matter.

CNBC/Bloomberg/Fox have too many stock guys on who want to melt dark clouds for their silver linings. I don’t get it.

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