Richard Yamarone Economic Indicators to Watch

Economic Indicators to Watch
What Are the Odds of a 2012 Recession?
New York, NY
Monday, June 4, 2012

Richard Yamarone
Bloomberg Economic BRIEF
Author of “The Trader’s Guide to Key Economic Indicators”

Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737 Twitter: @Yamarone

Economy Isn’t Advancing Fast Enough to Engender Job Creation

Nonfarm Payrolls vs. Real GDP
Payrolls ('000) GDP YOY%
1200 6
5
800
4
400 3
2
0
1
-400 0

-800 -1
-2
-1200
-3
-1600 -4
NFP (lhs) GDP (rhs) -5
-2000
-6
-2400 -7
'85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11

Source: BEA, BLS, Bloomberg

Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737

Economy Operating Well Below its Potential
Real GDP (Blns) vs. Real Potential GDP (Blns)

$14,500

$13,500

$12,500

$11,500
Potential GDP
$10,500
Real GDP

$9,500

$8,500

$7,500

$6,500
CBOPGDPR <Index>, GDP CHWG <Index>
$5,500
1980 1985 1990 1995 2000 2005 2010 2015
Source: BEA, CBO, Bloomberg


Employment To Be a Slow Train Coming
Nonfarm Payroll Creation From Onset of Recession
102

100

98
'73 - '75

96 1980

'81 - '82
94
'90 - '91

92 2001

'07 - current
90
1 5 9 13 17 21 25 29 33 37 41 45 49 53

Source: BLS, NBER, Bloomberg Months


Employment To Be a Slow Train Coming -- II

peak-to-trough % jobs lost

Recession Date (months) total jobs lost (millions) months to job restoration peak-to-trough

Period 1 1948-49 11 2.34 22 5.17

1953-54 10 1.71 23 3.33

1957-58 8 2.22 20 4.17

1960-61 10 1.19 20 2.16

1969-70 11 1.04 18 1.46

1973-75 16 2.17 19 2.70

1980 6 1.16 10 1.20

1981-82 16 2.84 28 3.09

AVG: 11 1.83 20 2.91

Period 2 1990-91 8 1.62 32 1.40

2001 8 2.71 48 2.04

AVG: 8 2.16 40 1.72

Period 3 2007-09 (current) 18 8.31 ? 6.03


No Hiring by the Private Sector

Unemployed Workers per Job Opening
Total Private Hires, (thousands) 8
5,500
7

6
5,000
5
4,500 4

3
4,000
2

3,500 1
shaded areas are
0
3,000 2001 2003 2005 2007 2009 2011
2001 2003 2005 2007 2009 2011
Source: BLS, NBER, JOLTTOTL , USUETOT
Source: BLS, Bloomberg HIREPRIV


No Words to Express this Stat

Average Duration of Unemployment in Weeks
45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0
1948 1958 1968 1978 1988 1998 2008
Source: Bureau of Labor Statistics USDUMEAN <Index>


Little “Improvement” in Unemployment Benefit Claims
Continuing, Emergency, and Extended Jobless Benefits ('000)

12,000

10,000

8,000

6,000

4,000

2,000

0
2000 2002 2004 2006 2008 2010 2012

Source: U.S. Department of Labor INJCEUC, INJCEXB, INJCSP


Little Signs of Recovery…


Trusted Street Indicator Signaled ‘Double-Dip’
ECRI Weekly Leading Index
Smoothed Growth Rate (%)
30

20

10

0

-10

-20

-30
1990 1995 2000 2005 2010
Source: ECRI, Bloomberg ECRWGROW <Index> <GO>


Economy Set for An ‘About-Face’
Leading Economic Indicators (Y/Y%)
vs. Real GDP Growth (Y/Y%)
8 12
10
6 8
6
4 4
2
2
0
-2
0
-4
-6
-2
-8

-4 -10

Series2 -12
-6 -14
LEI (rhs) GDP CYOY <Index> <GO>, LEI TOTL <Index> <GO> -16
-8 -18
'85 '95 '05
Source: Bureau of Economic Analysis, The Conference Board


If GDP Dips to 2.0% -- It’s Recession Time
Real GDP (Y/Y %)
14

12

10

8

6

4

2

0

-2

-4

-6
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008

Source: NBER, BEA, Bloomberg GDP CYOY <Index>


Robust Fed Index Points to Sub-Par Performance
Chicago Fed National Activity Index

Three Month Moving Average
1.00

0.50

0.00

-0.50

-1.00

-1.50

-2.00

-2.50

-3.00

-3.50

-4.00
'90 '93 '96 '99 '02 '05 '08 '11

Source: Federal Reserve Bank of Chicago CFNAI <Index>


Economic Deceleration Occurred During Early June
Real GDP (Y/Y%) vs. Railcar Loads of Waste/Scrap (Y/Y%)
40 8.00

30
6.00

20
4.00
10

0 2.00

-10 0.00

-20
-2.00
-30 Railcar Loads (lhs)

Real GDP (rhs) -4.00
-40
RAILWAST <Index>
-50 -6.00
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Source: Association of American Railroads, BEA, Bloomberg


Manufacturing Gains Not Generating Jobs
Industrial Production Index, Manufacturing Jobs ('000)
20,000 105

100
18,000

95
16,000

90
14,000
85

12,000
80

10,000
75
Mfg Jobs (lhs) IP (rhs)
8,000 70
1995 2000 2005 2010
Source: Federal Reserve, BLS USMMMANU <Index>, IP <Index>


It’s 1941 For Manufacturing
U.S. Manufacturing Employment
(in thousands)
20,000

19,000

18,000

17,000

16,000

15,000

14,000

13,000

12,000

11,000

10,000
1940 1950 1960 1970 1980 1990 2000 2010

Source: Bureau of Labor Statistics USMMMANU <Index>


Won’t Get Any Jobs from Housing
Residential Construction Spending ($ mls)
Construction Employment (thousands)
700,000 8,000

600,000 7,500

Spending (lhs) Construction Jobs (rhs)
7,000
500,000

6,500
400,000
6,000
300,000
5,500

200,000 USECTOT <Index>, CNSTRESI <Index>
5,000

100,000 4,500
Source: U.S. Department of Commerce, Bureau of Labor Statistics, Bloomberg

0 4,000
1993 1997 2001 2005 2009


This is what the Fed is Trying to Revive?
Residential Investment as a Percent of GDP (%)
8

7

6

5

4

3

2
1947 1954 1961 1968 1975 1982 1989 1996 2003 2010

Source: BEA PFIVRESI <Index>, GDP CUR$ <Index>


Housing Depression Continues
Mortgage Bankers Association's
Purchase Applications Index
550

500

450

400

350

300

250

200

150

100
2005 2006 2007 2008 2009 2010 2011 2012

Source: Mortgage Bankers Association
MBAVPRCH <Index>


Home Prices Falling Again
S&P-Case-Shiller Home Price Index AZ-Phoenix

300 CA-Los Angeles

CA-San Diego

CA-San Francisco

CO-Denver
250
DC-Washington

FL-Miami

FL-Tampa

200 GA-Atlanta

IL-Chicago

MA-Boston

MI-Detroit
150
MN-Minneapolis

NC-Charlotte

NV-Las Vegas
100
NY-New York

OH-Cleveland

Source: S&P/Case-Shiller OR-Portland

50 TX-Dallas

2000 2002 2004 2006 2008 2010 2012 WA-Seattle


Commercial Construction Slump

Total U.S. Commercial Construction Spending ($ mlns)
$100,000

$90,000

$80,000

$70,000

$60,000

$50,000

$40,000

$30,000

$20,000
1993 1996 1999 2002 2005 2008 2011

Source: U.S. Census Bureau CNSTCOMM <Index>


Retailers Headed Out of the Malls

Regional & Strip Mall Vacancies
12.0%

11.0%
Strip Mall Regional & Superregional Malls

10.0%

9.0%
Source: Reis Inc.
8.0%

7.0%

6.0%

5.0%

4.0%
2000 2003 2006 2009


State & Local Governments May be a Ticking Time Bomb
State & Local Government Employment (in thousands)

14,800 5,250

14,600 5,200

5,150
14,400
5,100
14,200
5,050
14,000
5,000
13,800
4,950
13,600
4,900
Local (lhs)
13,400
4,850
State (rhs)
13,200 4,800

13,000 4,750
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: BLS USEGSTSA <Index>, USEGLCSA <Index>


Earnings/Analyst Conference Calls

Bloomberg Orange Book

Summary of Commentary on ____________________

Current
Economic
Conditions

By Corporation

NI ORANGEBOOK <GO>

from earning statements commencing July 1, 2010


What is Being Said…
“And so we're still seeing that midnight shopping in our stores when that EBT card, it's like a
debit card, when it is ready and it is funded, there are people who are in the store at
midnight because they know it turns on. And they have shopped from like 10:45 to midnight
and they're waiting for that card and then our lines open up. And we've had some of our
busiest ours at midnight.”
Rosalind Brewer, EVP, Wal-Mart April 12, 2011
“I think the most telling indicator for us that economic weakness and employment is the key
issue driving soft volumes, is the fact that we continue to see, as – in contrast to the historical
norms, we continue to see volume pick up heavily at the beginning of each month, and then
steadily erode through the month, being particularly soft in the last week to 10 days of the
month. That just tells us that people are running out of money.”
Gregg Engles, CEO Dean Foods May 10, 2011

“Now clearly when it gets to the end of the month and they've run out of dollars and the
first of month gets there, you'll see some pick-up in sales. I would say it's not as dramatic as
it was two years ago due mostly to the fact that not 100% of those benefits are getting
loaded on to people's cards..”
J. Michael Schlotman, CFO, SVP Kroger May 17, 2011


It Pays to Read those 200 Transcripts…
Fed Ex Total US Package Shipments (Y/Y%) vs. Real GDP (Y/Y%)
GDP Packages
8.00 10.00

6.00
5.00

4.00

0.00
2.00

0.00
-5.00

-2.00

-10.00
-4.00 GDP (lhs) Fed Ex Shipments (rhs)

-6.00 -15.00
1999 2001 2003 2005 2007 2009 2011

Source: Federal Express, Bureau of Economic Analysis


Not Enough Fuel in the Tank
Real Disposable Personal Incomes (Y/Y%)

8.00

6.00

4.00

2.00

0.00

-2.00

-4.00

-6.00
1990 1995 2000 2005 2010

Source: Bureau of Economic Analysis


Not Enough Fuel in the Tank -- II
Average Hourly Earnings (Y/Y%) by Industry

Other Services
Lesiure & Hospitality
Education & Health
Professional business svcs.
Financial Activities
Information
Utilities
Transportation & warehousing
Retail Trade
Wholesale Trade
Manufacturing
 PCED Inflaton 2.14%
Construction
Mining & Logging

-1.0 0.0 1.0 2.0 3.0 4.0 5.0

Source: Bureau of Labor Statistics


What Happens When the Stimulus Ends?

Government Stimulus Driving Incomes
Incomes in $ billions

$10,500

$10,000

Real Dis Pers Inc Real Pers Inc Ex-Transfers

$9,500

$9,000

$8,500

Source: BEA, Federal Reserve Bank of St. Louis, Bloomberg
$8,000
2000 2002 2004 2006 2008 2010 2012
PIDSDCWT <Index>, PIDSPINX <Index>


Recession Comparison of Real Incomes
Real Incomes Ex-Transfers From Onset of Recession
106

104

102

100

98

96
'73 - '75 1980
94

'81 - '82 '90 - '91
92

90
2001 '07 - current

88
1 5 9 13 17 21 25 29 33 37 41 45 49

Source: BLS, NBER, Bloomberg Months


Collapse In Credit Card Debt, Still Uncertain
Monthly Change in Consumer Revolving Debt ($ billions)
10

8

6

4

2

0

-2

-4

-6

-8

-10

-12
2007 2008 2009 2010 2011 2012

Source: Federal Reserve CICRRRTL <Index>


Persons Receiving Food Stamps at All-Time High
Supplemental Nutrition Assistance Program
Number of Participants

50,000,000

45,000,000

40,000,000

35,000,000

30,000,000

25,000,000
2007 2008 2009 2010 2011

Source: U.S.D.A, Bloomberg FDS PNUM <Index>


There is No Holy Grail of Economic Indicators


‘Fab Five’ – Dining Out
Spending: Dining Out(Y/Y%)

8

6

4

2

0

-2

-4

-6
'98 '01 '04 '07 '10
RPCEDPMB <Index> <GO>
Source: BEA, NBER


‘Fab Five” – Jewelry & Watches

Spending: Jewelry & Watches Y/Y%
16

12

8

4

0

-4

-8

-12

-16

-20
'98 '01 '04 '07 '10

Source: BEA, NBER
RPCEDJRY <Index> <GO>


‘Fab Five’ – Cosmetics & Perfumes
Spending: Cosmetics & Perfumes (Y/Y%)
9

6

3

0

-3

-6

-9
'98 '01 '04 '07 '10

Source: BEA, NBER RPCEDCOS <Index> <GO>


‘Fab Five’ – Women’s Dresses
Spending: Women's & Girls' Clothing (Y/Y%)
12

9

6

3

0

-3

-6

-9
'98 '01 '04 '07 '10
RPCEDWGC <Index> <GO>
Source: BEA, NBER


‘Fab Five’ – Casino Gambling
Spending: Casino Gambling Y/Y%
24

20

16

12

8

4

0

-4

-8

-12

-16
'98 '01 '04 '07 '10
Source: BEA, NBER RPCEDCAS <Index> <GO>


Trade Picture isn’t Looking Too Encouraging…


Trade Helped During the Housing Bust,
But No Longer Convincingly Contributor
Contribution to GDP
Residential Spending & Trade
3
2.44
2.5 2.22 2.21
1.95 2 Residential Trade
2
1.55
1.5 1.37

1 0.79

0.44 0.42 0.42 0.5 0.43
0.38 0.4
0.5 0.24 0.25
0.1 0.15 0.09 0.03
0.06
0
-0.06 -0.01
-0.12 -0.1
-0.5 -0.27 -0.25 -0.26
-0.41 -0.34
-0.62 -0.55 -0.6 -0.59
-0.72 -0.73 -0.68
-0.76
-1 -0.91 -0.97
-1.13 -1.18 -1.21 -1.19
-1.5 -1.24 -1.26
-1.36 -1.43

-2
-1.97

-2.5
'06 '07 '08 '09 '10 '11 '12
Source: BEA GDP %NETX <Index>, GDP%RES <Index>


Money Beginning to Enter Goods Market to ‘Chase too Few Goods’
C& I Loans Large Commercial Banks ($blns)
900

800

700

600

500

400

300

200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Federal Reserve, Bloomberg ALCBLCID <Index>


Inflation Not A Primary Concern
Personal Consumption Expenditure Deflator (Y/Y%)
6

5

4

3

2

1

0

-1
PCED Core-PCED

-2
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

Source: BEA, Bloomberg PCE YOY <Index>, PCE DEFY <Index>


Richard Yamarone Economic Indicators to Watch

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