The Anomalous Role of Federal Spending

The Lehmann Letter (SM) Flat federal spending has been an anomalous feature of the recovery from the Great Recession. In the past federal spending was the engine that pulled the economic train past the storm clouds of recession into the bright sunlight of full employment. This time it’s the private sector that has grown and federal spending that has lagged. The latest data continue to confirm this anomaly. Today the Bureau of Economic Analysis released a slight downward revision of its fourth-quarter estimate for GDP: For the most part the revision was unremarkable. But an examination of federal spending Continue reading

Business Equipment Disappoints

The Lehmann Letter (SM) A cursory examination of the chart depicts escalating orders for business equipment until 2000. Then the chart reveals a break in the trend. The 2007-2008 peak should have exceeded $100 billion. It was a disappointing $80 billion instead. Can we expect a new and even higher peak of, say, over $120 billion in the course of the current expansion? Not likely. New orders appear to be flattening as this expansion passes its fifth birthday. New Orders for Nondefense Capital Goods (Recessions shaded) Today’s Census Bureau announcement of $78.3 billion in new orders for January is not Continue reading

New Home Sales: Judge for Yourself

The Lehmann Letter (SM) Take a look at the graph. You decide if you see anything encouraging. Now imagine 12 dots on the chart, all fluctuating between 400 and 500. It would be difficult to find encouragement. But that’s what we’ve had over the past year. New Home Sales Recessions Shaded This morning’s report from the Census Bureau, although it shows an improvement from December 2013 to January 2014, does not yet set an upward trend: Home sales were a seasonally-adjusted annual rate of 468,000 in January. But they began 2013 in January at 458,000 and finished in December Continue reading

Consumer Confidence Still Not Strong Enough

The Lehmann Letter (SM) The chart makes amply clear that consumer confidence in the 80s is below the range usually associated with prosperity. Consumer confidence must register in the 100s to indicate that households feel sure of their circumstances. Then, and only then, will consumers engage in spending levels that signify a robust economy. Consumer Confidence Recessions shaded That’s why this morning’s announcement from the Conference Board is disappointing. The Board said that consumer confidence fell slightly to 78.1 in February: Let’s hope for better luck next time. (To be fully informed visit © 2014 Michael B. Lehmann Continue reading

The Concept of Europe

The Lehmann Letter (SM) Stalin must be turning over in his grave. Almost 70 years after the end of World War II the European Union is on Russia’s doorstep, not the other way around. The events in Ukraine over the weekend signify more than the toppling of a strong man by determined citizens. It is reminiscent of the toppling of the Soviet puppets in Eastern Europe over 20 years ago. And that takes us back to the end of World War II and the emergence of the concept of a new Europe. Leaders like Adenauer of Germany, Spaak of Belgium Continue reading

Housing: More Evidence of Trouble

The Lehmann Letter (SM) This morning’s bulletin from the National Association of Realtors was ominous. Existing home sales are flat, and have been flat for a year. It appears that the bounce-from-the-bottom is over: Maybe not for home prices, but apparently for home sales. This weakness fits the pattern seen in new-home sales and housing starts. Growth has stalled. That’s ominous because housing was Ground Zero for the Great Recession and must be Ground Zero for any subsequent robust expansion. The road to full employment runs through homebuilding. Existing Home Sales (Recessions shaded) The chart shows the earlier surge through Continue reading

Inflation Not a Threat

The Lehmann Letter (SM) This morning the Bureau of Labor Statistics reported that consumer prices rose by 0.1% in January: That translates into a 1.2% increase on an annual basis for the month of January. The Bureau’s press release began: “The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment….” You can see that the increase was only 1.6% over the last 12 months. Inflation is not Continue reading

Housing: The One Million Barrier

The Lehmann Letter (SM) Housing starts just can’t seem to break through the one million barrier. And they will have to if the economic expansion hopes to gain sufficient strength to bring us to full employment. This morning the Census Bureau reported a sharp 16% drop in housing starts to 880,000 in January: Housing Starts Recessions shaded Look at the chart. You can see just how inadequate that number is. (To be fully informed visit © 2014 Michael B. Lehmann        

The US Is #1 in Science & Technology R&D (But for how long?)

The Lehmann Letter (SM) Satchel Paige said: “Never look back. Someone may be gaining on you.” We are so accustomed to the US having the lead in science and technology, we rarely worry if anyone may be gaining on us. At the same time, however, we assume the lead is important for our economic well-being and we will always hold the lead. If that “we” includes you, take a look at Annie Lowrey’s article in the February 14 edition of the New York Times: “U.S. Dominance in Science Faces Asian Challenge” The article examines the research and development (R&D) Continue reading

Happy Presidents’ Day!

The Lehmann Letter (SM) Washington, Lincoln, FDR…… A great man for each century. The nation called and they were there. We’re lucky we had them. Take a look at history and see what the other nations had in those days. See what so much of the world has today. We’re the world’s longest-running democratic republic, and our presidents helped keep it going. Enjoy the day! (To be fully informed visit © 2014 Michael B. Lehmann