Latest Economic Data Still Paints a Longer Term Ugly Picture or Does It?

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Commodities, Macroeconomics

Whether one looks at unemployment numbers (up to 9.6% from last month) despite the addition of 67,000 new jobs (less 54,000 jobs lost for August) and the loss of 27,000 manufacturing jobs this month vs. a gain of 34,000 jobs last month or some scary housing numbers (according to Josh Spoores of Majestic Steel USA, using HousingWire Data 14m+ mortgages are now underwater and the number could rise to 20m), the data continues to paint an ugly picture. Let’s take that mortgage number and analyze it a bit more. What does that mean from a population perspective? We worked our own napkin calculation and came up with fully 11% of the US population of 311,000,000m people or 33.040m people are currently underwater or live in households currently underwater (We used US Census Bureau data to come up with the percentage). With that number potentially rising to 15% of the US population and a question from someone on our team wanting to know if the number of people with mortgages underwater were the same people currently unemployed (we suspect some overlap but actually they likely comprise two portions of the US population), it’s hard to see anything sunny in the data!

What I personally have always found most intriguing, when examining economic data, involves the range of opinions as to what the future brings. One well-respected economist, with a long track record of accuracy is Brian Beaulieu, of Institute Trend Research whom we have written about previously. In a recent briefing document he stated as recently as August, “The next three years will bring a broad-based recovery in consumer and business to business markets. In addition, he said, “The current recovery best described as tepid will continue into 2011. Growth accelerates in 2012 and simmers to a halt in the second half of 2013 when a new but mild, recession begins. He makes several more predictions and comments examining the credit and commercial real estate markets, the debt crisis, etc. His website boasts, “Only one economic trends forecaster has a 96% accuracy rate and 60 years of correct calls. So it’s tough to take issue with his track record.

But on the flip side, our friends over at the Consumer Metrics Institute paint a more negative picture particularly with their contraction watch charts which we have posted several times on this site here and here, as two recent examples. Deep in one of their recent reports available to subscribers, Rick Davis provided a “consumer driven recessionary diary, which we thought was quite unique and we reprint here with courtesy of the Consumer Metrics Institute:

â–º December, 2007: Spending slightly more than last year, sub-prime mess is somebody else’s problem

â–º May, 2008: Gas prices way up, banking crisis in the news — maybe we need to be little cautious

â–º August, 2008: Democratic National Convention says things really are getting different this time, maybe more caution is warranted

â–º November, 2008: Good, the election’s over, and gas prices are down — things are getting normal again

â–º March, 2009: The 401K may be hurting, but at least we have the house to retire on

â–º June, 2009: Unemployment numbers don’t look good, but those usually start back down

â–º August, 2009: A lot of vacant houses in the neighborhood, let’s rethink retirement funding

â–º January, 2010: Unemployment is getting worse, let’s pay down our credit cards

â–º May, 2010: There may be a recovery going on somewhere else, but it certainly ain’t here

â–º August, 2010: Politics are getting ugly again, things aren’t about to improve anytime soon

Needless to say, the Consumer Metrics Institute believes we’ll be in recession again mostly likely days before the general election. Second quarter GDP numbers continue to be revised downward and will likely do so again on September 30, when the BEA makes their latest adjustment public.

In a follow-up post, we’ll take a glass half full look at some other leading economic indicators that look more positive as well as examine the metals scrap markets.

–Lisa Reisman

Comments (5)

  1. Phil says:

    I don’t agree with the Consumer Metrics Institute.

    Transport is near max capacity, businesses are hiring and not firing as much, most have cut costs as much as possible, money supply at an all time high and on and on and on. Thus we will not enter a recession until the gov pulls back. This by no means will have us party like it’s 1999 but it also means that we could stay flat for a while.

    I like the glass half full. The time to be half empty was 2007 and 2008 when most of these people could barely hit their arses with two hands.

  2. Phil,

    You don’t have to like Consumer Metrics; they provide data that is the leading-most of leading indicators. I have seen how most of the other indicators have followed theirs with the bottom-line being GDP, which is right where they said it would be, and they said it months ago.

    GDP will be negative in Q3 on final revision and -4% or worse in Q4 and likely close to that in Q1 of 2011.

  3. Actually Trend Research is spinning their results. Their site says this:

    Aug-05 Forecast: Home prices stay high for the next 18 to 24 months
    Actual: Prices peak 19 months later in 2007

    But in fact housing prices topped in 2005, if not 2004, according to ECRI – http://www.businesscycle.com/resources/

    http://www.nahb.org/fileUpload_details.aspx?contentID=55761

    Looking at most of their calls just does not impress me at all. Nothing against them but if I get to spin like they do I am right 100% of the time because I called a great bull market in 1982, a bear market in 2000 and another in 2007.

    I’ll take the data of Consumer Metrics Institute.

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