David Stanowski Publisher
by David Stanowski
Case-Schiller Residential Real Estate Indexes
Traffic Volume Trends
When did the Great Recession actually begin?
A very compelling argument can be made that it began in 2000, and the University of Michigan Consumer Sentiment Index tends to confirm that. This month's collapse below the lows reached at the height of the 2007-2009 financial crisis is the lowest this index has been in 31 years! Note the red arrow pointing to the last lower low in May 1980!
The University of Michigan Consumer Sentiment Index paints a clear picture of how the country feels about its political and economic future. The all-time high occurred in January 2000 coincident with the peak in many stock indexes. As the NASDAQ Bubble burst in 2000-2002, the FED created a tremendous amount of credit which eventually halted and reversed the stock market decline, and created a real estate bubble.
However, even as the real-estate bubble reached unheard of heights and finally peaked in 2005-2006, and the new stock market rally hit a new high in some indexes in 2007; this surge of recklessly-created credit did not make Americans feel nearly as positive as they did in 2000!
The stock market plunge from the fall of 2007 to the spring of 2009, and the on-going real estate decline drove sentiment down into the mid 50's; 51% below it's former high!
The massive bear-market rally in stocks from the spring of 2009 into the summer of 2011 raised sentiment, but no where near the levels seen in 2000, or even 2007.
The unprecedented credit creation by the FED since 2008 has lifted stocks and commodities, but the economy shows no signs of a typical post WWII recovery which is why sentiment is so negative. A typical recovery would have sentiment at least above 90, instead of the paltry 77.5 that it reached in February 2011! Regardless of the propaganda from Washington and the financial media, the people can see in their everyday lives that things are not good, and probably nowhere near a bottom. Real estate prices continue their march downward, unemployment remains stubbornly high, and the credit crisis gets worse by the minute.
Some cycle projections seem to show that the Great Recession could last into 2016!
The monthly 20-City Index reached its peak at 206.52 in July 2006 during the height of the Bubble. By April 2009 it stood at 139.26, 33% below the peak. After the FED created trillions of dollars of new credit, and special home-buyer tax incentives were offered, the free fall halted, and there was a modest bounce, but these draconian measures were unable to keep prices from hitting a new low in March 2011 at 137.64. After a 5-month bounce, prices have now declined for 7 consecutive months to another new low of 134.10 in March 2012!
This new low tends to confirm the fact that the Great Recession is not over!
March 2012 was down 2.6% from year ago levels.
The quarterly National Index reached its peak at 189.93 in Q2 2006 during the height of the Bubble. By Q1 2009 it stood at 129.17, 32% below the peak. After the FED created trillions of dollars of new credit, and special home-buyer tax incentives were offered, the free fall halted, and there was a modest bounce, but these draconian measures were unable to keep prices from hitting a new low in Q1 2011 at 125.75. Q1 2012 hit another new low of 123.33.
This new low tends to confirm the fact that the Great Recession is not over!
Notice that employment, i.e. the number of jobs, is lower than it was 10 years ago!
The U-3 unemployment rate that is announced as the official rate is still at 9.2%, but the all-inclusive U-6 rate is 16.2%!
"Last month I commented things are awful at first glance and simply bad beneath the surface. This month things took a huge turn for the worse.
Three months ago I commented "It is very questionable if this pace of jobs keeps up." Clearly it didn't, for the second straight disastrous month. Certainly this cannot all be blamed on the Tsunami in Japan. The entire global economy is slowing rapidly as I have commented numerous times.
Economists projected a drop in the unemployment rate, I called for a rise to 9.2%.
Few were prepared for today's grim numbers.
Law School Class 2010:
Starting Salaries for Lawyers Plunge 20%,
Temporary Jobs are 27% of Total,
12.4% of Graduates Receive No Offers
Weekly Unemployment Claims Exceed 400,000 for 13th Consecutive Week,
Exceed 415,000 Ten Out of Last Eleven Weeks:
From the progressive pro-Obama Economic Policy Institute:
"This morning’s release of the June 2011 Employment Situation report by the Bureau of Labor Statistics showed a labor market in retreat. Virtually every single measure was devastatingly weak: only 18,000 payroll jobs were added, average hours declined, nominal wages fell, unemployment was up in almost all age groups, more than 250,000 workers dropped out of the labor force altogether, and the public sector continued to bleed jobs. Furthermore, a downward revision to last month’s data means that this is the second month in a row with job growth at 25,000 or less. This is a remarkable, across-the-board backslide. The President and Congressional leaders need to stop talking about deficit reduction and start talking about job creation." --- EPI labor economist Heidi Shierholz
"The economy currently has 6.9 million fewer jobs than when the recession started. But because the working-age population is naturally increasing all the time, in the three years and five months since the recession started we should have added around 4.1 million jobs to keep pace with population growth. This means the current gap in the labor market is roughly 11 million jobs (Figure 1). To close that gap within three years, we would have to add around 400,000 jobs every single month for 36 months. By comparison, over the last three months we added just 160,000 jobs per month on average. At that rate, it will take well over a decade to get back to the pre-recession unemployment rate. Two years out, this recovery is not yet producing close to the rate of jobs growth needed to dig out of the hole we are in any time soon."
"Figure 6 shows that the share of the working-age population with a job (also known as the employment-to-population ratio) has not yet improved. So far in this recovery, we are still treading water near the bottom of a very deep hole."
"At the official end of the recession, the unemployment rate for whites was 8.7%, which has declined somewhat to 8.0%. The unemployment rate for Hispanics at the end of the recession was 12.2%, which has declined by a lesser extent, to 11.9%. Black workers have been hit the hardest: At the end of the recession the black unemployment rate was 14.9%, and it has since increased to 16.2%. Black workers in this country have faced an unemployment rate of 15% or more for the last 22 months."
"Furthermore, with inflation growing faster on average than wages since the end of the recession, real wages are lower now than they were when the recession ended."
Ten Facts About the Recovery
From the progressive pro-Obama Center on Budget and Policy Priorities:
"Today’s very disappointing employment report shows that two years after the technical end of the recession and after 16 straight months of private-sector job creation, the jobs deficit remains huge (see chart). The depth of the job losses from the recession is unprecedented since the Great Depression, and the length of time it will take just to get out of the jobs hole — much less to restore full employment — will dwarf that of the sluggish jobs recovery from the 2001 recession."
"As you can see in the chart, Williams tracks three unemployment rates:
1. The "official unemployment" number that the government and the press headline (called "U-3"). This is the most narrow and least accurate, because it includes only workers actively looking for full-time work. But even that number rose from 9.1% to 9.2% last month.
2. The all-inclusive unemployment according to the government ("U-6"). This measure does include workers who are not currently looking for jobs or have been forced to accept lower-paying, part-time jobs. And even the government admits this number is terrible, surging in June from 15.8% to 16.2%, the highest this year.
3. But what I want you to focus your attention on is Williams' Shadow Government Statistics estimate of the true, all-inclusive unemployment (the "SGS Alternate"). Why are the government's numbers wrong? Because in 1994, the Clinton administration decided to stop counting workers who had been looking for a job for more than a year. If you include them, says Williams, the true unemployment rate in the U.S. is now about 22.7%!"
Money and Markets
Publisher's Note: And all of these data and graphs reflect the situation AFTER SPENDING TRILLIONS of DOLLARS to FIX THIS!!
BEA Reports 1Q-2011 and "Great Recession"
Far Worse Than We Were Previously Told
Note: the first part of this article looks at the percentage change in GDP from one quarter to the following quarter. The second part analyzes the GDP in a given quarter versus the same quarter a year ago.
Quarter-Over-Quarter Change in GDP
"Included in the BEA's first ("Advance") estimate of second quarter 2011 GDP were significant downward revisions to previously published data, some of it dating back to 2003. Astonishingly, the BEA even substantially cut their annualized GDP growth rate for the quarter that they "finalized" just 35 days ago -- from an already disappointing 1.92% to only 0.36%, lopping over 81% off of the month-old published growth rate before the ink had completely dried on the "final" in their headline number."
"And the revisions to the worst quarters of the "Great Recession" were even more depressing, with 4Q-2008 pushed down an additional 2.12% to an annualized "growth" rate of -8.90%. The first quarter of 2009 was similarly downgraded, dropping another 1.78% to a devilishly low -6.66% "growth" rate. And the cumulative decline from 4Q-2007 "peak" to 2Q-2009 "trough" in real GDP was revised downward nearly 50 basis points to -5.14%, now officially over halfway to the technical definition of a full fledged depression."
Year-Over-Year Change in GDP
Once Year-Over-Year GDP change dips below +2%; a recession normally follows!
http://www.bea.gov/newsreleases/national/gdp/2011/pdf/gdp2q11_adv.pdf See Table 8, Page 32
The long-term picture of GDP growth on a year-over-year basis is even more alarming!
"I have already pegged a U.S. recession as a virtual certainty." "It is evident that we will be going into another recession with the levels of output, employment and income all lower now than they were prior to the last contraction phase."
David Rosenberg 03 August 2011
Each month, the U.S. Department of Transportation publishes a report on Traffic Volume Trends in the United States, where it adds up all the billions of miles that have been traveled on the nations roads over the preceding twelve months.
"Traffic Volume Trends is a monthly report based on hourly traffic count data reported by the States. These data are collected at approximately 4,000 continuous traffic counting locations nationwide and are used to estimate the percent change in traffic for the current month compared with the same month in the previous year. Estimates are re-adjusted annually to match the vehicle miles of travel from the Highway Performance Monitoring System and are continually updated with additional data."
Recessions are periods where economic activity is either greatly reduced or even turns negative. Since traveling is an economic activity, we should expect to see the distance that Americans collectively travel greatly reduced or even turn negative in a recession.
The 41-year period in question has been marked by a steadily growing number of miles driven. By most measures, the 1973-75 recession was the most severe since WWII, but on this graph it looks like a brief flatline. The 1980-82 recession was less severe but longer, and the 1990-91 recession is an even shorter flatline in the middle of the chart (not marked). By this measure, the current recession, that began in 2007, is already the most severe during this period.
By this measure, this recession began in November 1973, bottomed 11 months later in October 1974, and broke out to a new high, 19 months after it began, in June 1975.
By this measure, this recession began in April 1979, bottomed 13 months later in May 1980, and broke out to a new high, 40 months after it began, in August 1982.
By this measure, this recession began in November 2007, bottomed 18 months later in May 2009, but HAS FAILED TO BREAK OUT TO A NEW HIGH 48 months after it began. In fact, it just hit a new low in November 2011.
Traffic volume says that the current recession is by far the worst in the last four decades and it is far from over!
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