Recession?

[6SpeedTA95]

May 2 (Bloomberg) -- The U.S. lost fewer jobs than forecast in April, and the unemployment rate dropped, signaling that the economic slowdown may be milder than the 2001 recession.

Payrolls shrank by 20,000 workers, following a revised 81,000 drop in March that was larger than previously estimated, the Labor Department said today in Washington. The jobless rate fell to 5 percent, from 5.1 percent in March.

``We are in a recession, this report doesn't change that,'' said Ellen Zentner, economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who had forecast a payrolls cut of 25,000. ``What it does is support the idea that the downturn will be mild. Consumer spending isn't going to tank.''

Treasury notes fell and the dollar gained on speculation the Federal Reserve will refrain from cutting interest rates next month after seven reductions since September. An average of 121,000 jobs a month were eliminated in the first four months of the 2001 recession, compared with an average of 65,000 this year.

``Obviously a negative number is still negative,'' said Bill Cheney, chief economist at John Hancock Financial Services in Boston, in an interview with Bloomberg Television. ``But it is still so close to zero that essentially it means flat,'' just as government tax-rebate checks are being mailed, which will be ``almost guaranteed'' to boost job growth.

Economists forecast payrolls would fall by 75,000 in April after a previously reported 80,000 decline the previous month, according to the median of 82 projections in a Bloomberg News survey.

Further Fed Steps

Minutes before the jobs figures were published, the Fed said it will increase its auctions of cash to banks and expanded the collateral it takes on from bond dealers. The steps are aimed at alleviating strains in credit markets.

Today's report also showed that income growth slowed last month as the economy stalled. The economy's 0.6 percent expansion rate over the six months through March was the weakest performance since the U.S. was last in a recession in 2001.

Factory payrolls slumped by 46,000 workers, Labor said. Economists surveyed by Bloomberg had forecast a decline of 35,000. In the construction industry, employers cut 61,000 jobs, the most since February 2007.

General Motors Corp., the world's largest automaker, said April 28 it's reducing production of large pickup trucks and sport-utility vehicles this year at four plants in the U.S. and Canada because of slowing sales. The plan affects 3,550 workers.

Car Sales

Industry figures released yesterday showed that autos sold at a lower-than-forecast 14.4 million annual pace in April, the fewest since 1998.

Service industries, which include banks, insurance companies, restaurants and retailers, added 90,000 workers last month, the most this year, after an increase of 7,000 in March, today's report showed. The advance was led by business and professional services, along with education and health jobs.

Accenture Ltd., the world's second-largest technology- consulting company, will hire 60,000 people worldwide, Chief Executive Officer William Green told reporters on April 22. The company hasn't seen a drop or delay in orders from banks and financial companies, he said.

Retail payrolls declined by 26,800 after falling 19,300 a month earlier.

Home Depot Inc., the world's biggest home-improvement retailer, said May 1 it will close 15 stores and scrap plans for 50 more because the U.S. housing slump is hurting sales. The company will eliminate or move 1,300 jobs because of the closings.

Bank Hiring

Payrolls at financial firms increased by 3,000 jobs, after dropping 4,000 the prior month, Labor said. The gain, the first since July, is a surprise after figures from the Securities Industry and Financial Markets Association showed that Wall Street banks and securities firms, hit by $309 billion of mortgage losses and writedowns, slashed 48,000 jobs in the past 10 months.

Federal Reserve policy makers this week lowered the benchmark overnight lending rate between banks by a quarter percentage point, to 2 percent, in a bid to revive the economy. The government also started sending out tax rebate checks that were part of its fiscal stimulus plan.

``Household and business spending has been subdued and labor markets have softened further,'' the central bank said April 30 in announcing its decision. It also said that the easing that has taken place since last year, along with efforts to stabilize financial markets ``should help to promote growth over time.''

GDP Growth

The U.S. economy expanded at a 0.6 percent annual pace in the first quarter, the Commerce Department said on April 30, as inventories increased because consumer spending slowed and business investment dropped. The rise in stockpiles, along with smallest gain in household spending in seven years, indicates the economy will weaken further in coming months.

The average work week declined to 33.7 hours from 33.8 hours, according to today's report. Average weekly hours worked by factory workers decreased to 40.9 from 41.2, while overtime fell to 3.9 hours from 4.0 hours. That brought average weekly earnings down by $1.45 to $602.56 last month.

Workers' average hourly earnings rose by 1 cent, or 0.1 percent, the least since October, to $17.88 in April. That compares with a 0.3 percent gain forecast by economists in the Bloomberg survey.

Hourly earnings were 3.4 percent higher than a year earlier, the smallest gain since January 2006.

Job losses and higher food and energy costs are making consumers anxious. The Conference Board's confidence index for April fell to 62.3, a five-year low. The share of respondents who expected their incomes to rise over the next six months was a record-low.

Bloomberg.com: Worldwide

Unemployment rates actually dropped and payrolls shrank much smaller than expected. This bodes well for the economy as a whole. It will be interesting to see what happens in May because things are not yet stable in the credit markets and housing markets. Though things are much improved.

[WickedLou9]

I guess I had the market timing right after all.

[JaJae]

I admit, I bought the hype. I was sure we were heading into a recession. Now.. not so sure.

First stories like this started coming out.

DATAWATCH Positive first quarter GDP bolsters recession naysayers
04.30.08, 10:10 AM ET

WASHINGTON (Thomson Financial) - Recession naysayers were bolstered by Wednesday's GDP report, which showed positive economic growth in the first quarter.

'If we're in a recesssion, the economy contracts, so the news today is we're right on the precipice but so far the economy hasn't fallen off of the cliff,' said Christopher Rupkey of Bank of Tokyo-Mitsubishi (other-otc: MSBHY.PK - news - people ) UFJ.

The economy grew at a 0.6 pct annual pace in the three months through March, an identical pace to fourth quarter growth and three times as fast as the 0.2 pct gain economists polled by Thomson's IFR Markets had expected. And it avoided a contraction that some economists had feared.

Consumer spending rose just 1.0 pct in the quarter after rising 2.3 pct in the fourth quarter, the weakest pace since the second quarter of 2001. Consumer spending accounts for more than two thirds of the US economy.

Growth also stemmed from growing exports and inventory building. Exports grew 5.5 pct after rising 6.5 pct in the fourth quarter. Inventories added 0.81 percentage points to growth after subtracting 1.79 percentage points in the fourth quarter.

Weakness in the housing market continued to drag down growth. Real residential fixed investment fell 26.7 pct in the first quarter after falling 25.2 pct in the fourth quarter.

Rupkey said the first quarter is 'probably going to be the weakest possible quarter' in part because of a drag in automobile sales. Going forward, the economic news will be less dire, as economic stimulus checks 'should bolster consumer spending and housing should cease to be a drag,' he said.

DATAWATCH Positive first quarter GDP bolsters recession naysayers - Forbes.com

Now we're starting to see this:

Wall Street mood swing: Gloom gives way to (premature?) optimism

Despite a drumbeat of bad economic news, the stock market is up — almost 11 percent in the last few weeks. Junk bonds, those risky corporate IOUs, are rallying. The value of financial shares, bank loans, tricky credit derivatives — up, up, up. Many on Wall Street, the epicenter of the credit mess, seems to think that the worst is over.

Wall Street mood swing: Gloom gives way to (premature?) optimism - International Herald Tribune

The Dow Jones industrials cross 13,000 as dollar soars and optimism rises about economy

NEW YORK (AP) -- Wall Street shot higher Thursday as investors, while anticipating another dismal jobs report Friday, viewed the rising dollar and falling oil prices as promising signs for the economy. The Dow Jones industrial average soared nearly 190 points to close above 13,000 for the first time since Jan. 3.

Stocks rise and Dow crosses 13,000 as dollar advances: Financial News - Yahoo! Finance

Employers cut fewer jobs in April, jobless rate falls to 5 percent

WASHINGTON (AP) -- Employers cut far fewer jobs in April than in recent months and the unemployment rate dropped to 5 percent, a better-than-expected showing that nonetheless reveals strains in the nation's labor market.

Employers cut fewer jobs in April, jobless rate falls: Financial News - Yahoo! Finance

To recap... GDP grown, Stocks Up, Dollar Up, Employment Up... Where's the recession? Sure this is stagnant growth compared to what we're seeing, but we're still seeing an upward trend. How much of the downfall we're seeing could be attributed to the media sensationalism towards the economy?

[WickedLou9]

To be fair, we are in a recession, it's just not the end of the world that some people said it would be.

[A_C_E]

We are definitely in a recession. As Lou pointed out yesterday, 0.6% annualized GDP growth is based on a 2.6% inflation measure, which is simply false. It's closer to 4% right now.

JaJae, those indicators are not "up"--They're just less negative, which leaves us still technically in recession. But yea, it'll be milder than assumed.

[A_C_E]

Originally Posted by WickedLou9

I guess I had the market timing right after all.

Don't be so sure about that yet

I'm holding off on making any moves until we start seeing Q2 indicators. The insanely low level of consumer spending growth still has me pretty worried. I wouldn't do anything until July, personally. The opportunity for capital growth you miss out on between now and then is going to be minimal compared to the risk you're incurring. It's not worth it to move now.

[Stylerod]

Originally Posted by WickedLou9

To be fair, we are in a recession, it's just not the end of the world that some people said it would be.

How are we in a recession if the economy is still growing? Doesn't the word recession mean NEGATIVE economic growth?

[WickedLou9]

Originally Posted by Stylerod

How are we in a recession if the economy is still growing? Doesn't the word recession mean NEGATIVE economic growth?

We have had 2 quarters of negative growth. The .6% growth is a preliminary number that is based on 2.6% inflation which is factually incorrect. By any measure, inflation is closer to 4%. If you use accurate data we are in a recession. Sure you can make up numbers and then use them to justify saying that we aren't but that's not indicitive of reality.

[WickedLou9]

You know what they say about 3 kinds of lies though... Wether or not we have tweak the number htis way or another, the economy isn't doing well and I think most people recognize that. I hate when people get caught up in arguing the minutia of what a recession is. Thats an academic arguement of no real consequence.

[TankRizzo]

It'd be quite vindicating to see commodity traders get screwed in a turn around

[A_C_E]

Originally Posted by WickedLou9

We have had 2 quarters of negative growth. The .6% growth is a preliminary number that is based on 2.6% inflation which is factually incorrect. By any measure, inflation is closer to 4%. If you use accurate data we are in a recession. Sure you can make up numbers and then use them to justify saying that we aren't but that's not indicitive of reality.

I really hate when people use that theory. There are much better ways to determine a recession than pos/neg GDP growth.

[6SpeedTA95]

Originally Posted by A_C_E

We are definitely in a recession. As Lou pointed out yesterday, 0.6% annualized GDP growth is based on a 2.6% inflation measure, which is simply false. It's closer to 4% right now.

JaJae, those indicators are not "up"--They're just less negative, which leaves us still technically in recession. But yea, it'll be milder than assumed.

Actually that 2.6% is pretty accurate. The price fo fuel is way up and housing is way down.

The CPI is 2.6ish percent...GDP appears to have grown and at worst it was flat.

[A_C_E]

Originally Posted by 6SpeedTA95

Actually that 2.6% is pretty accurate. The price fo fuel is way up and housing is way down.

The CPI is 2.6ish percent...GDP appears to have grown and at worst it was flat.

CPI is a bad measure of inflation and always has been.

Money-velocity inflation equation works out to like 3.7%....and that's a much more accurate indicator.

[6SpeedTA95]

Originally Posted by A_C_E

CPI is a bad measure of inflation and always has been.

Money-velocity inflation equation works out to like 3.7%....and that's a much more accurate indicator.

I agree, the CPI ignores things like food/energy/housing.

A lot of estimates of real inflation are actually LOWER than the CPI for the first quarter. Why? The huge drop in home prices. So saying its completely inaccurate may be true but assuming its only worse is false.

[A_C_E]

Originally Posted by 6SpeedTA95

I agree, the CPI ignores things like food/energy/housing.

A lot of estimates of real inflation are actually LOWER than the CPI for the first quarter. Why? The huge drop in home prices. So saying its completely inaccurate may be true but assuming its only worse is false.

Actually the core CPI excludes food and energy, while the regular CPI includes it.

I'm not assuming it's worse for the first quarter; I actually did the math and it came out to be worse.

[WickedLou9]

This is why I think it's silly to argue about the definition. Is it wrong to use the 2.6 CPI%? Definately not. It's a valid measure of something. Is it wrong to use the other measure? no. The definition of recession does not dictate how GDP should be calculated so there is no right answer. It think we should just be satisfied to say the economy is not doing well. If you want to talk about specfic indicators, thats fine too. Are we or aren't we in a techincal recession? I don't really care. It is what it is, and what it is aint that great.

[6SpeedTA95]

Originally Posted by A_C_E

Actually the core CPI excludes food and energy, while the regular CPI includes it.

I'm not assuming it's worse for the first quarter; I actually did the math and it came out to be worse.

correct

[Fed Up]

"If the CPI was calculated the same way it was when Paul Volker was the Federal Reserve Chairman, then we currently have 12% inflation, versus the 4% reported by our government. Which rate seems right to you?" Source: Shadow Government Statistics

Inflation at 2.6%? 4%? 4% is correct if you utilize the CPI-U.

Another misnomer someone mentioned is housing. Housing isn't included in the CPI, but "rents" are. Consumer Price Indexes for Rent and Rental Equivalence

You tell me by looking at these stats where inflation is since GW took charge:

EVERYDAY COSTS (per BLS.gov)

~

2008 top price
2000 lower price
% Change from 2000 to 2008

Gasoline (per gallon)

$3.28

$1.36
141%

Natural gas (per ccf)

$1.30

$0.71
83%

Electricity (per kwh)

$.116

$.084
38%

Milk (per gallon)

$3.87

$2.78
39%

Bread (per lb)

$1.28

$0.91
41%

Eggs (per dozen)

$2.18

$0.98
122%

Orange Juice (per gal.)

$2.54

$1.82
40%

Ground Beef (per lb.)

$2.33

$1.48
57%

FISCAL ISSUES

~

2008 top number

2000 next number
Percentage Change 2000 to 2008

National Debt

$9.4 trillion

$5.5 trillion
71%

Annual Budget surplus/(deficit)

($400) billion

$150 billion
($550) billion

Median S&P 500 CEO pay

$8 million

$6 million
33%

Median household income

$49,000

$42,000
17%

Consumer Price Index (per BLS)

211.1

168.8
25%

Consumer credit

$2.52 trillion

$1.54 trillion
64%

Median Home value

$168,000

$120,000
40%

Euro vs. Dollar

$1.57

$0.85
–87%