David Kirkpatrick

August 30, 2010

Job market, other indicators weak — double dip recession on the horizon?

Looks like not if the Fed can help it. This is likely to be a week full of not so good economic news, and if that scenario comes to pass there’ll be a lot of talk about a “double dip” recession.  And make no mistake, the talk will be justified. I’m not sure what fiscal tools Bernanke has left in the box, but there seems to be agreement that he’ll go more chainsaw and less scalpel to avoid a double-dipper. I guess we’ll see …

From the link:

With little support in Congress for a renewed burst of government spending, the burden of rescuing a lagging recovery falls upon the nation’s central bank. The Fed already has kept its benchmark lending rate near zero for almost two years, and has tried to further loosen credit via unusual asset purchases, known as “quantitative easing.” In a speech Friday, Bernanke said the Fed would take additional “unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”

He told an audience of central bankers in Jackson Hole, Wyo., that the Fed could spur growth by:

•Expanding its $2 trillion balance sheet with additional purchases of long-term securities.

•Announcing plans to keep its benchmark interest rate near zero for “a longer period than is currently priced into the markets.”

•Or reducing the minuscule interest banks earn on deposits with the central bank.

Bernanke said the Fed must balance the benefits of employing unconventional monetary policy tools against their costs. Overly aggressive action could raise doubts that the Fed would be able to unwind its extraordinary assistance once the economy recovers.

August 29, 2010

The housing market continues to suffer

And the White House is prepping to announce new initiatives to keep homeowners in their houses and forestall a new spate of foreclosures. The real-world effects of this recession are still ongoing, regardless what direction any economic indicators may point, and the help Main Street is getting from DC feels like a trickle here, a trickle there. So much for the “summer of recovery.”

From the link:

Housing and Urban Development Secretary Shaun Donovan revealed to CNN Friday that the Obama administration plans next week to unveil two new initiatives to deal with the crumbling housing market, and he left the door open to also reviving the expired $8,000 tax credit for first-time home buyers that had been propping up the industry.

“We’re going to be rolling out an FHA refinancing effort to help borrowers who are under water in their homes get above water,” Donovan said in an exclusive interview taped for CNN’s “State of the Union with Candy Crowley” on Sunday. “And second, we’re launching an emergency homeowners’ loan program for unemployed borrowers to be able to stay in their homes.”

The swift action being pushed by President Obama’s housing chief come in response to awful news in the housing industry this week, starting with Tuesday’s revelation that existing home sales hit their lowest level in over a decade, declining by over 27 percent during the month.

Update: this comes from today’s Playbook — brunch edition:

An administration official e-mails: “These are not new. He said ‘launching’ because they are previously introduced, but have not yet hit the market. The FHA short refi program was announced in March, and will launch in early September. The emergency homeowner emergency loan program, which was included in the Frank-Dodd bill (HUD put out in a release and conf. call two weeks ago), will be launched in October.”

August 2, 2010

The Great Recession, animated

A chilling look at unemployment from January 2007 to May 2010.

January 22, 2010

A tiny ray of economic hope

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 5:02 pm

It’s not much, but anything ought to feel pretty good right now. Especially with unemployment still dogging the economy.

From the link (bold text is my emphasis):

The number of newly-laid off workers seeking jobless benefits unexpectedly rose last week, as the economy recovers at a slow and uneven pace, but a forecast of future economic activity jumped 1.1% in December, suggesting that economic growth could pick up this spring.

Layoffs have slowed and the economy began to grow in last year’s third quarter, but companies are reluctant to hire new workers. The unemployment rate is 10% and many economists expect it to increase in the coming months.

Here’s more detail on the good news portion of the link:

Separately, the 1.1% increase in the Conference Board’s index of leading economic indicators was larger than the 0.7% rise that economists surveyed by Thomson Reuters had expected.

December 2, 2009

We all know …

… the 2000s were a fiscal disaster — tough markets, bubbles growing to bursting by the end of the decade and drunken sailor federal spending by a GOP-led government. The party of fiscal conservatism? Hardly.

Things were bad, but look at the longer view to get an idea of exactly how bad using just one indicator — the S&P 500 index (emphasis mine):

With the ’00s about to flip the odometer to the ’10s, there has been a raft of commentary about how lousy a decade this has been. Stock investors can vouch for that: The ten years since Y2K are on track to produce the worst total returns for investors since the 1930s. And, after the roaring ’80s and ’90s, the disappointment of the last decade is all the more galling.

Indeed, it will be hard for investors to wash the taste of trillions of dollars of losses from their mouths.

In both the 1980s and the 1990s, the broad S&P 500-stock index index provided a total return (which includes dividends) of more than 400%, according to Capital IQ, a Standard & Poor’s business. The total return for the S&P 500 since New Years 2000 has been negative 10.8%.

Now the Bush 43 administration and GOP Congress are given a pass on the events of 9/11 and how that disrupted the entire American social structure, including commerce. But that event was over eight years ago, plenty of time for the party of fiscal restraint to get the economy back on track, right? Not so much. And where did the profligate spending go? Into half-assed and outright fraudulent foreign adventures:

Hirsch believes a key factor for stocks in the 2000s was the September 11 terrorist attacks and the U.S. government’s expensive involvement in wars in Afghanistan and Iraq. The Vietnam War hurt stock returns in the 1970s, he notes, while World War II kept the market down in the early 1940s.

Of course Bush inherited what is now considered a highly over-valued market that was ripe for a fall back to earth. September 11 was the balloon bursting sledgehammer and seven additional years of absolutely horrible fiscal policy and economic management has put us where we are right now, and leaving a steaming bag for Obama’s administration that will most likely dominate the bulk of his first term, if not much, much longer.

And right wing media is now happily blaming Obama for the economic conditions on the ground.

December 1, 2009

Deloitte’s Shift Index finds return-on-assets woes

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 12:56 pm

Received mail from Deloitte today on the sequel to its Shift Index report from June. What is the Shift Index you ask? I’ll let boilerplate from Deloitte do the explaining:

Deloitte’s Shift Index pushes beyond cyclical measurement and looks at the long-term rate of change and its impact on economic performance. The Shift Index tracks 25 metrics across three sets of main indicators: foundations, which set the stage for major change; flows of knowledge, which provide more powerful ways to drive productivity; and impacts, which help gauge progress for firms, customers and creative talent. The Shift Index will continue to be updated to track changes over time and compare performance trends across countries.

For a deeper look at the Shift Index methodology and findings, please go towww.deloitte.com/us/shiftindex.

The key thing to focus on up there is “long-term.” This report is looking at and creating a much more broad picture than a lot of the economic news out there starting with the media’s obsession with the daily Dow numbers and moving on to corporate policy that emphasizes stock valuation over sustained business success.

With that in mind, the Shift Index is finding a lot of business sectors wanting when looking at the big operational trends, particularly in return-on-assets.

Here’s an overview of the sequel to the Shift Index from John Hagel, co-chairman of Deloitte’s Center for the Edge:

The sequel to the original Shift Index report breaks apart the data for the US economy into fourteen different industry segments and includes an in-depth analysis of nine of these industries.  The results are eye-opening and contradict much conventional wisdom about management practices:

  • We found that the long-term erosion in return on assets is widespread across virtually all industry segments.  The four industries that have experienced the most severe erosion in return on assets are technology, telecommunications, media and automobiles. The fact that three of these four industries are so intimately linked to the development and deployment of digital technology infrastructures reinforces our view that these infrastructures are a key driver of performance pressures.  Only two industries escaped this erosion in return on assets – Aerospace & Defense and Healthcare.  We do not think it is accidental that these are two of the most regulated industries in the US, reinforcing our view that public policy is the other key driver of performance pressures.
  • Our analysis indicates that there is no correlation between labor productivity improvement and return on assets performance across industries.  In fact, some of the industries with the most significant improvement in labor productivity also experienced the most substantial erosion in return on assets. This finding challenges conventional management views that labor productivity is a key factor in driving profitability improvement.  While improvements in labor productivity are certainly necessary when facing increasing economic pressure, these improvements are clearly not sufficient.
  • Here’s another counter-intuitive finding.  Many executives believe that innovation – conventionally defined as product innovation – is the key to escaping profit pressures.  Yet, the technology industry, widely viewed as one of the most innovative industries, in the US, has also experienced some of the most severe profit erosion of any industry.  Again, product innovation may be necessary, but it certainly does not appear to be sufficient to sustain profitability.
  • Not all participants are suffering.  While firms face increasing economic pressure, customers appear to be benefiting from increasing market power and flexibility in moving from one brand to another across many industries.  Creative talent also benefits – total cash compensation to creative talent is rising substantially in most industries.
  • Intensifying competition appears to be driving much of the erosion in profitability for firms, but traditional measures of competitive intensity, especially measures of industry concentration, appear to significantly understate the growing economic pressure coming from outside traditional industry boundaries and from both customers and creative talent.
  • This intensifying competition is shifting the focus of value creation from protection of proprietary knowledge stocks to more effective participation in a broader and more diverse range of knowledge flows that will help firms to more rapidly refresh their knowledge stocks.  The problem is that our institutions are optimized for protection of knowledge stocks at the expense of participation in knowledge flows.  As a result, the most powerful form of innovation may be institutional innovation – re-thinking the rationale of firms and re-defining roles and relationships across large numbers of institutions.

These findings reinforce our belief that the increasing focus of executives and policy-makers on short-term, cyclical results and trends has blinded them to more fundamental, long-term trends that are re-shaping our business landscape.  In particular, their understandable concentration on the current economic downturn has lulled many participants into a false sense of complacency.  No matter how bad the current environment is, many are reassured that these conditions are only temporarily and that we will sooner or later return to the conditions that prevailed before the downturn.  The Shift Index suggests that such hopes are misguided and dangerous – they obscure the long-term growth of economic pressures that will continue well beyond the current economic downturn.  Until and unless executives begin to focus on these longer-term pressures, we are likely to see continuing deterioration in performance.

Hit this link for Deloitte’s press release on the Shift Index.

October 23, 2009

Latest Fed Beige Book?

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:12 am

The news is rather, er, beige.

From the link:

U.S. consumer spending was weak in most parts of the U.S. during late summer and early fall, leaving unexciting prospects for economic growth into the rest of 2009.

In a report Wednesday, the Federal Reserve said its 12 districts indicated either stabilization or modest improvements from depressed levels in many sectors of the economy

September 30, 2009

The economy wasn’t quite as bad as thought for Q2

More of that, “Well, the news still isn’t good, but it is better than we thought.” There’s a lot of looking for any ray of positive economic news still going on.

From the link:

The U.S. economy contracted at slower pace than previously thought in the second quarter as improved consumer and business spending cushioned the impact of a record decline in inventories, according to a government report on Wednesday.

The Commerce Department’s final estimate showed gross domestic product fell at a 0.7 percent annual rate instead of the 1.0 percent decline reported last month.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, slipping at a 1.2 percent rate in the second quarter after dropping 6.4 percent in the January-March period.

This will probably mark the last quarter of decline in output for the U.S. economy, which slipped into recession in December 2007. The economy is believed to have rebounded in the July-September quarter.

With the second-quarter contraction, the country’s real GDP has shrunk for four straight quarters for the first time since government records started in 1947.

September 2, 2009

U.S. productivity up to 2003 level

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 3:32 pm

Food for economic thought:

U.S. non-farm productivity was stronger than initially thought in the second quarter as companies slashed costs to protect profits, data showed on Wednesday.

The Labor Department said non-farm productivity rose at a 6.6% annual rate, rather than the 6.4% pace it reported last month. That was the biggest increase since the third quarter of 2003.

Productivity rose at a 0.3% pace in the first quarter.

Analysts polled by Reuters had forecast productivity, which measures the hourly output per worker, rising at a 6.4% rate in the second quarter.

Despite the increased productivity, output fell at a 1.5% rate in the second quarter, the department said, unchanged from its previous estimate, as over 6 million jobs have been cut since the recession began in December 2007. Output, measured on a year-on-year basis, was 5.5% lower.

August 18, 2009

Economic indicators …

Filed under: Business — Tags: , , , , , , , , — David Kirkpatrick @ 3:06 pm

… are analyzed, talked about, reported on and used to justify almost any position you might want to take on the state of the economy at any given moment — and can successfully be used to prove both sides of the argument.

This article lays out the “hows” and “whys” of a whole slew of leading and lagging indicators, so hit this link if you want a little more information on where all those figures are actually coming from and what they really mean to the economy.

From the link:

To determine the health of their patient, economists look to indicators, such as unemployment and consumer spending, in much the same way doctors monitor blood pressure and heart rate. One reading can’t provide enough information to understand the state of the economy. Several together can lead to accurate conclusions.

Earlier this year and in late 2008, many indicators pointed to the economic equivalent of a massive coronary. The U.S. economy has been in the longest recession since World War II. While there have been improvement, concerns remain. Will the economy suffer further setbacks or is it on the mend? No predictions can be guaranteed, but several key indicators point to a continued recovery. With the benchmark S&P 500 Index up about 50% in the past five months, a lot of money is riding on the economy returning to growth this year.

July 23, 2009

Dow tops 9000

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 3:22 pm

A first in six months. Are these finally those green shoots we’ve been reading about? I’m not holding my breath, but a lot of indicators seem to be at least a little positive. A definite uptick from either not so negative or neutral that had everyone excited earlier this year.

From the link:

In early afternoon trading, the Dow Jones industrial average was 2 percent, or 179 points, higher, while the broader Standard and Poor’s 500-stock index rose 22 points, or 2.2 percent. The Nasdaq gained 44 points, or 2.3 percent.

“We’ve had an exceptional rally here,” said Peter Cardillo, the chief market economist at Avalon Partners. “In the remainder of the summer we’ll see the S.&P. challenging the 1,000 mark.”

“The housing market does point to signs of stabilizing and that obviously is key to consumer confidence to begin to rebuild,” Mr. Cardillo said. “If we see daylight in the housing market that will give another indication that the economy crawling out of recession in the fourth quarter is achievable.”

Shares were up across all sectors in the S.&P., led by telecommunications, consumer goods and energy. Ford, which is the only Detroit automaker now publicly traded, was up almost 11 percent.

June 4, 2009

Economic indicators not behaving

News stories like this perfectly illustrate why I remain skeptical of any rosy near-term predictions. I honestly think the media is doing the general public a great disservice with the “doom,” “doom,” “doom” and then, “it’s all going to be great!,” followed soon after with, “alas, woe is us.” The news cycles leave people tired, confused and probably distrustful of most things they hear.

The fact is we remain in fairly uncharted territory and even though things are looking a little better in that everything is no longer in a free fall, many things can happen to really crater the global economy. Let’s just say we are not on solid footing by any measure right now. Any report to the contrary is just blowing smoke.

Instead of worrying over all this bipolar news, the best bet is to keep the stiff upper lip, chin up approach and just stay alert to the facts and conditions on the ground.

From the link:

The nation’s service sector shrank in May at the slowest pace since late last year. And factory orders rose in April. But the improvements fell short of economists’ expectations and disappointed investors, who sent stocks lower.

Economic reports earlier this week on home sales and manufacturing had been encouraging, but Wednesday’s figures sent a reminder that the economy remains sluggish.

“People assumed it was safe to go back outdoors, but it’s still raining,” said David Wyss, chief economist at Standard & Poor’s. “It’s just not raining quite as hard.”

The Institute for Supply Management said its services index registered 44 in May, up slightly from 43.7 in April. It was the highest reading since October. Service industries such as retailers, financial services, transportation and health care make up about 70 percent of U.S. economic activity.

But the ISM figure marked its eighth straight monthly decline, and it fell slightly below economists’ expectations. Any reading below 50 indicates the services sector is shrinking. The last time the index was at 50 or higher was in September.

Separately, the government reported that orders to U.S. factories rose 0.7 percent in April, the second increase in three months.

But the Commerce Department’s report fell short of analysts’ expectations. And the government also marked down the March figure to a 1.9 percent drop, from the 0.9 percent decline previously reported.

Wall Street fell after the disappointing figures were released. The Dow Jones industrial average dropped more than 65 points to 8,675.24. Broader averages also declined.

Federal Reserve Chairman Ben Bernanke, meanwhile, said Wednesday that the economy will begin growing later this year, but the improvement will be slight.

“We expect that the recovery will only gradually gain momentum,” he told lawmakers. “Businesses are likely to be cautious about hiring, and the unemployment rate is likely to rise for a time, even after economic growth resumes.”

The current recession, the longest since World War II, began after the bursting of the housing bubble led to a financial crisis last fall. Economists say recoveries after such crises tend to be slower, as credit remains tight even after growth returns.

May 29, 2009

Reading these economic indicators …

… might have less worth than reading tea leaves or engaging in navel gazing. Like most numbers they can be spun up, down or sideways, but anyone seeing blue skies and smelling roses from these reports has given up and started taking antidepressants.

From the link:

The economy is sending a message of hope laced with caution: That the recession is steadily easing, but new threats could delay any recovery.One piece of heartening news was that the number of people seeking first-time jobless aid fell last week, a sign companies are cutting fewer workers.

And even though sales of newly built homes were flat last month, the figures suggested that the battered U.S. real estate market is nearing a gradual comeback.

But pessimists could point to bleaker news Thursday: The number of people continuing to receive unemployment benefits rose to 6.78 million _ the largest total on records dating to 1967 and the 17th straight record-high week.

The figure signaled that the jobless rate, which reached 8.9 percent in April, will rise in May, economists said. And many economists expect the rate to approach 10 percent by year’s end.

Another worrisome sign is that a record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit, the Mortgage Bankers Association said. And the wave of foreclosures isn’t expected to crest until the end of next year.

April 29, 2009

The economy stumbles on

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 1:49 pm

It’s not imploding, but it’s not getting better just yet. Watch the indicators — such as the still falling GDP and rising unemployment, and on the positive side a rising consumer confidence — before you believe any media hype.

For the most part the media ignored this story until it reached crisis level (I’ve been blogging about the financial meltdown since the first days of this blog) and then went into full “we’re doomed!” mode. After scaring the pants off of everyone, the media is now going with things are better and the worst is over. Don’t go to the bank with that bill of goods.

Here’s the latest from the Fed:

Taking fresh stock of economic and financial conditions, Federal Reserve policymakers are considering whether they need to take additional measures to ease the recession.

Most economists are betting there won’t be any major announcements Wednesday at the end of a two-day meeting given the Fed’s bold $1.2 trillion move just last month to revive the economy.

Still, analysts aren’t ruling anything out as credit and financial stresses persist and a new potential danger has arisen to the economy in the form of the swine flu outbreak.

“Never say never with these guys. But I don’t think they have a real reason to increase support at this time,” said Michael Feroli, economist at JPMorgan Economics.

Fed Chairman Ben Bernanke and his colleagues are all but certain to leave the targeted range for its key bank lending rate between zero and 0.25 percent.

December 6, 2008

Mortgage delinquencies and foreclosures way up

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 1:07 pm

Now this is not really news, but as an economic indicator it’s very, very distressing. While Rome burns and corporate socialism goes on unabated, Main Street USA has been enduring a slow rot for a couple of years now.

There will be a heavy price to pay as a nation if this problem does not meet a real solution soon. I feel happy I have a very manageable mortgage, fixed at a great rate. I have friends who aren’t so lucky.

Some got a little greedy buying a home and some just got screwed by the broker/bank combo pressing them into loans that would never be workable under any circumstances, then completely hiding the nature of the loan before the shit hit the fan.

I bet a lot of these homeowners in trouble faced the same set of circumstances.

From the link:

One in 10 American homeowners fell behind on mortgage payments or were in foreclosure during the third quarter as the world’s largest economy shed jobs and real estate prices tumbled.

The share of mortgages 30 days or more overdue rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The gain in delinquencies was driven by an increase of loans with payments 90 days or more overdue.

October 10, 2008

Looks like another tough day on Wall Street

Maybe not as bad as yesterday, but mid-afternoon numbers don’t look too promising.

These figures come from the WSJ website and are current as of 2:37 pm EDT.

Dow Jones Industrials down 5.76%

S&P 500 down 6.53%

Nasdaq down 5.37%

10-year note down 0.81%

I guessing everyone is noticing a trend in direction in these indicators.

Update 2:32 pm CDT — There’s a bit of a rally heading toward the bell today and both the Dow and Nasdaq are pushing positive numbers — less than 1% into the green, but positive.

One story that seems to be getting lost in all the financial freak-out is oil is dropping like a rock. Crude is now below $78 a barrel.

From the link:

Crude futures sank to a 13-month low on the mounting threat to global oil demand from the financial crisis.

Light, sweet crude for November delivery settled $8.89, or 10.3%, lower at $77.70 a barrel on the New York Mercantile Exchange, the lowest settlement since Sept. 10, 2007. Brent crude on the ICE futures exchange closed at $73.65 a barrel, down $9.01.

Oil prices fell along with commodities from copper to corn, as well as the Dow Jones Industrial Average, which dropped for the eighth-straight trading day. Turmoil in the financial sector has resulted in a frozen credit market, cutting companies in the wider economy off from borrowing and threatening economic growth worldwide.

Final update 3:17 pm CDT — The markets close for the weekend and only Nasdaq held on for a gain. A 0.27% gain.

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