May Economic Indicators: Looking for Strength

The Lehmann Letter (SM) On Thursday the Bureau of Economic Analysis reported a meager 1.8% (adjusted for inflation) increase in first-quarter Gross Domestic Product (GDP). That’s not good enough to take us where we want to go. Corporate earnings and the stock market have recovered nicely, but that’s not the entire economy. And earnings and stocks can’t keep going north unless the remainder of the economy does well, too. Residential construction must emerge from the doldrums for that to occur. Unfortunately home prices continue to decline under the weight of excess housing inventories exacerbated by mass foreclosures. When existing-home sales Continue reading

Sour Mood: Is Consumer Confidence Deteriorating?

The Lehmann Letter (SM) The Conference Board’s index of consumer confidence won’t be out till next Tuesday, April 26. It fell last month. And this morning’s New York Times may provide an hors d’oeuvre of what to expect: A front-page article entitled “Nation’s Mood at Lowest Level in Two Years” begins by saying: “Americans are more pessimistic about the nation’s economic outlook and overall direction than they have been at any time since President Obama’s first two months in office, when the country was still officially ensnared in the Great Recession, according to the latest New York Times/CBS News Continue reading

Housing Starts: Uptick or Trend?

The Lehmann Letter (SM) CNN issued an encouraging report on housing starts this morning: It’s true that March starts at 549,000, and building permits of 594,000, are up sharply from February. But you should take a look at the full Census Bureau report to gain perspective: If you examine monthly data over the past two years you will see that housing starts have fluctuated around 600,000: Sometimes more, sometimes less. The chart confirms this. Housing Starts (Click on chart to enlarge.) Recessions shaded We need an upward trend, and we don’t have it yet. Optimistic reports, such as Continue reading

Going Broke? This Morning’s Federal Debt Scare

The Lehmann Letter (SM) The stock market slumped this morning after Standard & Poor’s presented its warning regarding US government deficits and debt. But the price of U.S. Treasury securities hardly fell. Apparently bondholders are not overly concerned. The federal government will curtail spending and raise tax revenues in order to deal with the problem. We’ll muddle through. Private borrowing, however, is another matter. During the recession it shrank and then disappeared as households and businesses began to repay their debts rather than initiate new borrowing. The problem is: Spending — financed by borrowing — must grow for the economy Continue reading

Inflation: Gaining Perspective

The Lehmann Letter (SM) Today’s report by the Bureau of Labor Statistics on March’s CPI increase — at a 6% seasonally-adjusted annual rate — rekindled fear of surging inflation: Take a look at the chart to put matters in perspective. You will see that in the 1970s inflation grew from 5% at the beginning of the decade to 15% at the end. That’s surging inflation. We are nowhere near those conditions now. CPI (Click on chart to enlarge) (Recessions shaded) What happened in the 1970s and what would have to happen today to reintroduce an inflationary increase of that Continue reading

Low-Wage America?

The Lehmann Letter (SM) Last week this letter reported a solid improvement in March job gains, but also warned that those improvements must be replicated month after month for several years to restore full employment. That wait will have consequences: These New York Times and Wall Street Journal articles point out that high unemployment generates stagnant and even falling wages and salaries. That decline may be necessary to clear the labor market and restore full employment, but it does have consequences. As they exhaust their unemployment insurance, many of the unemployed must take pay cuts in order to Continue reading

At Last: Solid Job Growth Numbers

The Lehmann Letter (SM) 216,000: That’s the March job-growth number. And the private-sector figure was even larger: 230,000. You can see for yourself by going to the Bureau of Labor Statistics website: This is the second month of solid employment gains. These figures are preliminary and subject to revision, but the trend so far is certainly positive.You can see from the chart that a robust economy brings job gains of between 200,000 and 300,000 per month. We enjoyed that kind of growth from 1995 to 2000 (dot-com boom) and in the middle of the last decade (real-estate boom). Job Continue reading