False Straws?

The Lehmann Letter (SM) The Census Bureau and the National Association of Realtors reported slightly stronger housing starts and existing-home sales for November. Is this the start of an upward trend? We’ll see. There have been many false dawns. The problem is: We’ve been down so long we grasp at false straws of hope. That’s a consequence of settling into a new regime of reduced circumstances and expectations. Small improvements are overblown. (To be fully informed visit http://www.beyourowneconomist.com/) © 2011 Michael B. Lehmann

Consumer Spending

The Lehmann Letter (SM) Take a look at two leading indicators recently released by the Federal Reserve and the Department of Commerce. The Fed reported that consumer credit (excluding mortgage borrowing) had risen by $92.4 billion, at a seasonally adjusted annual rate, in October. The chart shows that a strong economy depends upon around $100 billion monthly in new consumer credit. The chart also shows that households desperately reduced outstanding debt during and immediately following the recession. Now they are beginning to borrow once again. We will see whether or not consumer credit rises to the $100 billion level required Continue reading

It’s Housing

The Lehmann Letter (SM) This letter has emphasized housing’s importance. Residential construction is flat. The economy won’t grow strongly until home building rebounds. For validation of this view see Floyd Norris’s December 1 posting on The New York Times site: http://www.nytimes.com/2011/12/02/business/time-to-accelerate-the-housing-recovery-floyd-norris.html?scp=3&sq=Floyd%20Norris&st=cse Sad to say: It doesn’t look like any policy initiative will be successfully applied. That means the needed rebound will not occur. (To be fully informed visit http://www.beyourowneconomist.com/) © 2011 Michael B. Lehmann

Good News, Bad News

The Lehmann Letter (SM) “The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today.” That’s the first sentence from today’s Bureau of Labor Statistics employment report: http://stats.bls.gov/news.release/empsit.nr0.htm The unemployment rate fell as discouraged workers left the labor force, even though employment grew by 120,000. As this letter has said many times: Job growth must be twice as great, month after month for several years, before full-employment is restored. How will that happen? Job Growth (Click on chart to enlarge) (Recessions shaded) The Continue reading

PMI Remains Anemic

The Lehmann Letter (SM) This morning the Institute for Supply Management announced that the Purchasing Managers Index (PMI) had risen to 52.7 in November from 50.8 in October: http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942 The PMI measures purchasing managers’ impressions of the economy’s strength based on their experience buying inputs for their firms. A number below 50 indicates a contracting economy; a number above 50 indicates an expanding economy. Purchasing Managers’ Index (Click on chart to enlarge) (Recessions shaded) Inventories (Click on chart to enlarge) (Recessions shaded) The charts indicate the correlation between inventory expansion and the PMI. Manufacturing production slumped during the recession as Continue reading