January Publication Schedule

The Lehmann Letter (SM) This letter will follow the most important economic indicators as the New Year begins. Households are key: Housing, autos, consumer credit, consumer confidence. Business investment is also critical: New orders for capital goods. If these pick up, and improve strongly, employment gains will follow. PUBLICATION SCHEDULE January 2011 Source (* below)……Series Description……Day & Date Quarterly Data BEA…………………GDP…………………Fri, 28th Monthly Data ISM….Purchasing managers’ index….Mon, 3rd BLS……………….Employment………… Fri, 7th BEA….New-vehicle sales…(Approximate).Fri, 7thFed……Consumer credit……(Approximate).Fri, 7thBLS……………….Producer prices……. Thu, 13th Census…………………Inventories…….. Fri, 14thBLS………………….Consumer prices.….. Fri, 14thFed……………..Industrial production…….Fri, 14thFed…………….Capacity utilization……….Fri, 14thCensus…….……..Housing starts…….Wed, 19thConf Bd……….Leading indicators…….Thu, 20th NAR……………Existing-home sales….Thu, 20th Conf Bd…….Consumer confidence….. Continue reading

Wrap Up and Forecast

The Lehmann Letter © Today’s New York Times (http://www.nytimes.com/2010/12/29/business/economy/29leonhardt.html?_r=1&ref=todayspaper) and Wall Street Journal (http://online.wsj.com/article/SB10001424052970203513204576047491075731426.html?mod=ITP_pageone_0) carried retrospectives on the economy and residential real estate as well as a cross-section of forecasts for 2011. The optimists point to expansionary monetary and fiscal policy: The recent round of tax-cut and unemployment-benefit extensions as well as the Federal Reserve’s expansionary stance. The holiday shopping boom buttresses that rosy view. This letter remains skeptical. Housing was the epicenter of the boom and bust, and housing continues in a slump. That’s symptomatic of the damage done to household balance sheets: Diminished net worth and liquidity plus Continue reading

Debt, Borrowing & Spending

The Lehmann Letter SM We’re faced with this anomaly: Everyone hates debt, but it will take more debt to finance the spending required to boost the economy. Q: How can you borrow more to finance increased spending while repaying your debts? A: You can’t. If households and businesses are to restore their balance sheets by rebuilding liquidity and retiring debt, they can’t at the same time borrow and spend the economy to prosperity. Private Borrowing (Click on chart to enlarge) (Recessions shaded) The chart illustrates the precipitous drop in borrowing that accompanied the recession. Borrowing turned negative when households and Continue reading

What the Fed Said

The Lehmann Letter © Yesterday the Federal Reserve’s Open Market Committee expressed disappointment with the recovery’s pace and clearly stated its intent to maintain an expansionary monetary policy: http://www.federalreserve.gov/newsevents/press/monetary/20101214a.htm Here’s what the Fed said: “Information received since the Federal Open Market Committee met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier Continue reading

Good News

The Lehmann Letter (SM) Yesterday’s letter highlighted auto sales: A key component of consumer demand. The letter pointed out that auto sales have bounced back from their recession lows, but still have a long way to go before regaining robust health. Today’s letter examines consumer credit: Another important indicator of household strength. Households have been repaying their debts in a desperate attempt to bolster their balance sheets by reducing liabilities and building liquidity. That seems like a good sign until one realizes that reducing expenditures is a time-tested method for paying down debt and conserving cash. That’s one reason this Continue reading

Half Full or Half Empty

The Lehmann Letter (SM) Auto sales provide a good illustration of the current recovery’s enigma. As is the case for the economy as a whole, new-vehicle sales have rebounded strongly but are still a long way from robust health. Examine the data: Go to http://www.bea.gov/national/index.htm#gdp, scroll down to Supplemental Estimates and click on Motor vehicles. Open the Excel file and click on the Table 6 tab at the bottom. Look at column I. Notice that new-vehicle sales were running between 16 and 17 million at a seasonally-adjusted annual rate for a decade until 2007. By 2009 sales had fallen to Continue reading

Employment Gains Slow

The Lehmann Letter (SM) Today the Bureau of Labor Statistics announced that the labor market is – at best – treading water: http://stats.bls.gov/news.release/empsit.nr0.htm You can view the data in tabular form at: http://stats.bls.gov/news.release/empsit.b.htm There are 15.1 million unemployed and an unemployment rate of 9.8%. The labor market must add 250,000 jobs a month for several years in order to restore full employment. That’s why today’s report, that November employment grew by 39,000 jobs. is so disappointing. Employment in government, construction, manufacturing, retail and finance all shrank. Professional and business services and education and health services did grow, but half of Continue reading