Sunday, February 03, 2013
Employment Report, Summed Up
Here is a graph showing the YoY percent change in unemployment levels for 0>14 weeks:
When it reaches 10%, we are in recession. We're basically there now.
The mid-cycle growth recession of the mid 1990s, which was partially caused by raising taxes, almost made it to the recession barrier. This can peak pretty high on the first rebound, so you don't look at the first peak out of recession (although that one was well past it). Once it steadies up and then starts climbing again, you panic.
In November and perhaps December we had more plausible deniability because of Sandy. But now - ???
This is why I would not have raised payroll taxes the 2%. I would have spread the increase over 2 years. If we had not raised payroll taxes, I would think maybe there was a little leeway. But does anyone really think that people won't have to contract spending?
On the saner side... check out the latest monthly missive from ContraryInvestory.
His last update was on January 31, 2013: "United States recession probabilities through November 2012"
US recession probability is down to 0.20%
I was going to point to the "Probability of Recession" chart as well. It blipped back down to essentially zero.
I've no idea how much faith to put in this indicator--it appears to be tuned to detect a recession synchronously with the downturn, rather than predict one months in advance. M_O_M's analysis is much more forward-looking.
Mauldin's latest Outside the Box has a piece from Roubini's group claiming that the recent uptick in consumer debt indicates that the Great Consumer De-leveraging is over.
What do you think? Seems a bit of a stretch to me with retirements rising, but if velocity goes up there's going to be commodity inflation like nobody's business...
I read that article and I wasn't at all convinced. Still looking for someone to make a good argument for recovery after all these years...
Consumer debt increases are all in student loans. Deleveraging may have bottomed in autos. As far as housing is concerned all increases are due to changes in banking rules allowing banks to keep REO longer and letting them become landlords.
Our country is now of the banks, by the banks, and for the banks. And only banks of a certain size.
A lot of that student loan debt isn't going to be repaid, and it's also clear that a lot of the students aren't going to get a real return on their student loans.
That's what worries me. For mortgages, the trend is still paydowns and cash-ins. What's particularly amazing is the low build up of car loans, given relatively good sales.
This is the current consumer credit report.
That is for November. Revolving credit is at 834 versus Q4 2011's 851 billion. Non-revolving credit is 1,917 versus Q4 2011's 1,780. However federal debt (all student loans) is 521 versus Q4 2011's 417. So student loans seem to be accounting for almost all (probably just about all, there is some private) of the 131 billion increase. It looks like car loans really account for the rest.
Capital gains taxes alone should slow business.
Before the downturn, I had sat down and figured that a great deal of the trajectory out would depend on boomer small businesses. Well, those boomers are all six years older now and that much closer to retirement. I worry that many will not make the capital investments in those businesses, given the poor economy, low returns, and higher potential taxes on shutting down those businesses.
The last thing we really need is for money to go back into the ground, but that may be exactly what is happening.
Thanks Charles and M_O_M. That's about what I figured, but like I said I'm watching for any signs of an increase in velocity.
A releated anecdote: A few years ago we had a woman come to the house every other week to help with the cleaning, before we had to give up that particular luxury. That was $80 per visit.
My wife informed me this morning that the same type of service now appears to go for $60. A 25% drop in 4 years. The people offering it are comparable, too--educated, not desperate or anything, but at loose ends looking for something to do.
Otherwise, I guess we can all trade commodity futures faster and faster. It doesn't do much for the local florist shop, though.
Do LBOs really increase velocity that much, with ZIRP in effect? There's a limited number of buyout targets out there.
That said, the private equity/buyout market is what seems to have replaced the IPO as the exit strategy of choice. To the extent that it feeds entrepreneurs it might help some.
I think most Student loans are Bankruptcy proof.
Velocity is where it's at. What confuses me is if it's not zero- even a small number x's what's been put into the system should have some result.
It's all so confusing.
We let our Man Servant go at the Office. His health insurance got to be $25,000/year and that plus his salary was too much to get our coffee and dounughts.
I try not to whine too much, but health insurance reform really was a missed opportunity. Well, it's too late now.
In this environment, the overhead is a killer.
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