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Wednesday, December 05, 2012

About That Recession Call

Update: At Small Dead Animals, the ATA graph was posted, and elicited this comment by Trent:
This is very bad. I have been trucking for 20 years and operating independently for the past 11 years. Freight volumes ALWAYS pick up in the fall of the year for the Christmas consumer rush. All those color tv's and Barbie dolls arrive at the store by truck. The graph displays an increase in tonnage in the fall of every year except this year. Additionally hurricanes and natural disasters ALWAYS create an enormous increase in trucking. Construction equipment, construction materials, relief supplies, FEMA trailers, generators, food and fuel are being trucked from all over North America to the East coast. In 2006 US DOT gave out special permits to trucks supplying FEMA after Hurricane Katrina excepting them from hours of service regulations in an effort to get more supplies and materials. The demand for supply trucks was that great. For there to be a slow down in trucking at this time is not a good sign.  
To be fair about it, a lot of the increased demand for trucking would occur after the storm, in November. Yet if you look at the graph, there was a downslope for all of 2012 before the storm, so those trying to attribute all of this to Sandy are clearly ignoring something real. Nor is this an isolated trend - rail has shown a slow weakening pattern and inland water also. End update

ATA truck tonnage index for October -3.8%:
October’s drop was the third consecutive totaling 4.7%. As a result, the SA index equaled 113.7 (2000=100) in October, the lowest level since May 2011. Compared with October 2011, the SA index was off 2.1%, the first year-over-year decrease since November 2009
It's only a flesh wound....  September Surface Trade with Canada/Mexico. Maybe the wound is a bit infected....

Rail continues to weaken. Hmm, let's culture that wound exudate....


The infection appears to be spreading at a rate historically associated with a bad outcome.

Unfortunately, we know that we have a first half downturn in light MV production pending. Culture comes back; we have the dreaded multi-QE resistant GDP-eating bacteria. As noted in the prior link, employment is a lagging indicator of economic inflection points. If the recession call is right, employment will now start to slacken.

It's worth reading the entire ADP report, because Zandi attributes the entire slack to Sandy.I have, however, never seen this combination of negatives without a recession. Maybe this time it is different, but the inflection points all seem to have started before Sandy. 

How about causation trends?

 A close inspection of the longer trends would suggest that growth in real personal disposable incomes YoY has fallen sharply below the rates needed to ensure an expansion, which has been followed by PCE YoY growth rates which have weakened below the historical expansion trend lines. 

Thus, the only thing holding the economy up has been stuff like cutting the payroll tax and growth in manufacturing. Yet manufacturing growth has clearly stalled out, and we are going to raise taxes next year. It appears that at least the payroll tax will be allowed to sunset. 

I'd say it's over, and the only question is the shape of this thing. It's quite likely that the Fed will double down on its QE if it can find enough assets to buy, but doing so will inevitably weaken the US dollar and cut US real disposable incomes for the lower income households and many producers. This, then, amounts to closet 2013 tax increase for over half the US economy, and thus indicates that the expansionary effect will be limited to say the least.

Comments:

I'm pretty sure that QE is no longer about economic stimulus. It's about the Treasury's ability to issue debt at an interest rate they can pay.

If this isn't already the case, then I'm pretty sure 2013 is the year that it becomes true.

 
If the Fed and Congress would just leave it alone the economy would mostly heal itself.

Instead they're like Elvis' doctor. Nothing worse than a doctor prescribing medicine when he has no skills in making a diagnosis. These idiots want to treat broken bones with pills and exercise.
 
MOM,

Over at dailyjobcuts.com, I have been noticing more university layoffs, especially in the private, for-profit space. Maybe this is the first sign of the higher ed bubble bursting?
 
Hey strangers! I didn't die, just been busy. :-)

Check it out: http://www.edisongauss.com/blackboard-math-app/

A friend did 99% of the programming in the app. I've been abusing HTML, nagging our graphics artist (he takes the "artist" part a little too seriously), and shaking bushes among sympathetic homeschool bloggers.

It looks like crap there, but if you have flash support you can see it run by going to the Amazon page and clicking the big green box under the price that says "TEST DRIVE NOW." Share it with a friend, niece, nephew, or the neighbor's kids that are always trespassing on your grass.

Cheers!

(Yes this is a cross-post from Snark's, er Mark's, but I think he and I are the only one's that comment both places. Unless there be sock puppets in our midsts. :-) )
 
Cool, Allan! I'm very impressed!
 
Cool, Allan! I'm very impressed!

Thank you. I know that you're not easily impressed :-) ...which is what makes your blog so worth-while.
 
Allan: Can we get 537 copies for those yahoos in DC?
 
RE: yahoos in DC

You bet. But you know what they say, you can lead a horse to water... :-)
 
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