There are economic recessions, and then there are economic RECESSIONS. The latest encounter with the dark side of the business cycle undoubtedly satisfies the later definition. The challenge, then, is figuring out how to convincingly promote growth on a sustainable, meaningful basis. Part of the solution requires deciding what went wrong, which suggests possible responses. On that analytical front, however, the standard advice from the dismal science these days is flawed, argued Nobel Prize winner Edmund Phelps in a New York Times op-ed last week.
Monthly Archives: August 2010
TALKING ABOUT JOBS, GDP & RELATED TOPICS
The July jobs report was a mixed bag, as we discussed on Friday. What does the punditocracy think? A brief sampling…
►Seattle Times:
“If we don’t see significant job growth by the end of the year, the economy could be in serious trouble,” said Bill Cheney, chief economist at John Hancock.
►San Francisco Chronicle:
“A double dip (recession) is not likely, but not out of the question,” said Sung Wohn Sohn, an economics professor at California State University Channel Islands.
ANOTHER ROUND OF MIXED NEWS ON THE JOB FRONT
U.S. unemployment remained unchanged at 9.5% and nonfarm payrolls shrunk by 131,000 last month, the government reported this morning. That’s not good, but it’s not quite accurate either once you consider that July is lighter by 143,000 temporary census workers. If we focus on the private sector, nonfarm payrolls rose by 71,000 in July. That’s better, but it’s still well short of what’s needed to convince the crowd that the economy is on a sustainable path of growth worthy of the name.
FRIDAY’S READING LIST: 8.6.2010
►Retailers don’t see back-to-school boost, report spotty sales for July
Cautious consumers translated into spotty sales for national retailers in July, according to data released Thursday, potentially signaling a tough back-to-school season for the industry.
►German Industrial Production Unexpectedly Declines
Industrial production in Germany, Europe’s largest economy, unexpectedly declined in June led by a drop in investment goods such as machinery and trucks.
PONDERING PROGRESS IN THE MONEY GAME
Is money management getting any better? How would we know? I wrestle with these and related questions in a story just published in the August 2010 issue of Financial Advisor magazine: “Searching For Progress: Financial innovation is under fire. Failing to beat the market is only one reason.”
MORE TROUBLE WITH WEEKLY JOBLESS CLAIMS
Today’s update on weekly jobless claims isn’t very encouraging for expecting a big positive surprise in tomorrow’s news on nonfarm payrolls for July. And that’s the charitable interpretation. But judge for yourself: the latest number on new filings for unemployment benefits shows a rise of 19,000 last week, bringing the weekly total to 479,000—the highest since early April. The year is more than half over and still no sign of improvement in this metric. So much for a V recovery, at least as far as new jobless claims go.
A BULL MARKET IN SAVING
Seth Fiegerman at MainStreet.com wonders if the U.S. is overdosing on savings. “Americans are getting better with their money, but in the process, we may be undermining the country’s financial recovery,” he wrote yesterday.
ADP EMPLOYMENT REPORT: A NET GAIN OF 42,000 JOBS IN JULY
The economy added a modest 42,000 nonfarm private jobs to payrolls in July on a net basis, according to today’s ADP employment report. The good news is that this is the sixth consecutive monthly gain. The bad news, as the accompanying press release advised, is that those six months of gains “have averaged a modest 37,000, with no evidence of acceleration.” Even an optimist has to concede that the pace so far in job creation has been tepid, at best. Unfortunately, it’s easy to think that more of the same is on tap for the foreseeable future. As such, that raises the possibility that the labor market remains vulnerable to a setback.
STILL WONDERING, WORRYING & DEBATING ABOUT DEFLATION
The market’s outlook for inflation has been meandering just below 2% since late June, based on the yield spread between nominal and inflation-indexed 10-year Treasuries. The implication: the jury’s still out on whether deflationary risks are the real deal or just a figment of the crowd’s imagination.
INCOME & SPENDING IN JUNE: GOING NOWHERE FAST
Today’s income and spending update for June was a whole lot of nothing. Literally. Disposable personal income and personal consumption expenditures were both flat last month vs. May. That’s not terribly surprising these days, but it’s hardly encouraging. Perhaps the best we can say is that it’s more of the same. Or, if you prefer, think of it as the latest installment on the new normal, which Pimco’s Bill Gross defines as “deleveraging, reregulation and deglobalization, all of which promote slower economic growth and lower inflation in developed economies while substantially bypassing emerging market countries that have more favorable initial conditions.”