Has the Recession Arrived?

[unlawflcombatnt]

Monthly Factory Orders increased only 1% for the month of February, much less than the +1.8% increase predicted. This follows January's decline of -5.7%. Over the last year, however, Factory Orders are down -1.1%. Excluding transportation orders, February orders declined -0.4%, following January's -2.5%. This was the 6th month out of the last 7 that ex-transportation orders have declined. February's total factory orders of $386 billion marks a 5% decline since December's seasonally-adjusted $406 billion.

Even some of the previously bullish experts are expressing newly found "concerns." Today's Factory Order report from Briefing.com states "The downward trend in factory orders is tuning in to a real economic concern. The struggling auto and housing sectors add to the softening in business capital investment as business confidence is fading with weak economic growth." They've also expressed a new concern for declining demand, as evidenced by their bolded statement "lack of demand is the heart of the manufacturing concern....." (At long last, some of the market experts are acknowledging that someone has to buy goods if they are going to be produced, and that unpurchased goods don't help the economy. Hallelujah!)

Despite this month's small increase in Factory Orders, the long term trend is clearly downward. This can be seen from the 3 graphs below from Briefing.com.








The Durable Orders decline has been even worse than overall Factory Orders decline. The recently reported Durable Goods Orders increase for February was revised from March 28th's previously stated 2.5% down to a 1.7% increase on April 4th. Comparing the last 3 months' total (December, January, & February) for Durable Orders with the same 3 months from the previous year, Durable Goods Orders are down 4.7%, from a 3-month total of $663 billion to $631 billion. This can be seen from the combined, modified charts below from the Census Bureau's April 2007's Factory Orders report and March 2006's Durable Goods report. (April 2007's report is on the top, March 2006 is on the bottom. Durable Goods Orders are underlined in red.)



The American manufacturing sector is clearly in recession. A rapidly declining housing sector, combined with a subprime meltdown that is metastasizing to other financial sectors, makes it difficult to see how this can be called a "strong" economy. It's even more difficult to see how the overall economy won't drift into a recession (if it's not in one already.)

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[Loge23]

1. Florida feels like it

I mentioned to a colleague recently that it felt like Florida was already in a recession.
Florida, as most folks know, was riding the crest of the wave during the boom. Now, things are a whole lot different. Blue-collar workers, busy during the boom, are leaving the state as the rise in housing costs have boxed them out.
One wag observed to me that, in the Keys, "the millionaires will soon be cutting the billionaires grass".
It's not a ghost town by any stretch, but growth is clearly not taken for granted anymore.

[unlawflcombatnt]

5. Housing Decline Worse in Florida

All the information I've seen indicates that housing is collapsing faster in Florida than anywhere else. But I think California and Arizona aren't be far behind.

unlawflcombatnt

Economic Populist Forum

[Loge23]

8. Census data for FL housing

Census data for new home starts (single family only) shows a 29% decrease state-wide from '05-'06.
For Jan & Feb so far in '07 vs. '06, it's much more ominous: -57%.

If it's any steeper anywhere else, I pity that state.

[unlawflcombatnt]

12. Thanks for the update

That -57% has got to cause a lot of employment loss as well.

[tanyev]

2. Look out! Here it comes!

[AX10]

3. Sometime this year, it will come.

Yes, the economy is slowing down. It has been doing so since last October/November.

[unlawflcombatnt]

4. Jan. Factory Order Decline Worst in 6 years

As a result of the downward revision of last month's Factory Orders, January's Factory Order decline was the worst in 6 years, according to a http://news.yahoo.com/s/nm/20070404/bs_nm/usa_economy_dc">Yahoo News Story.

Also, growth in the dominant Service Sector, which accounts for 80% of jobs, slowed to its slowest rate in over 4 years.

[nadinbrzezinski]

6. Take into account that many of the stats

we are seeing cannot be trusted. Unemployment comes to mind. So I woudl not be surprised if these numbers are off as well

As far as we are concerned, we alredy are in a recession

[AZgirl7]

7. AZ slowdown

Our AZ town on the Colorado River was way overinflated too, due to Californians speculating. They drove our prices crazy because we looked like a bargain compared to So Cal prices. There's tons of properties on the market now, but prices haven't really come down much. Just the occasional desperate person that MUST sell.

[unlawflcombatnt]

9. Yes

I completely agree that the published statistics are probably way off. I've copied & saved a lot of previous statistics published over the last 2 years, just to monitor this. Over 90% of the previous statistics for Housing are revised downward.

The Bureau of Economic Analysis routinely revises previously overstated statistics downward. Each year the final GDP gets revised downward. (For example, 2005's GDP was revised downward from 3.5% to 3.2%.) Also, when the first guess-timate of 4th quarter GDP comes out, the numbers for the trade balance haven't even been published yet. They just stick numbers in for imports & exports and concoct a total GDP from that. And they always underestimate the trade deficit.

In addition, the BEA also overstates Disposable Personal Income most months and quarters, resulting in a less ominous Savings rate.

As you've probably noticed, I like to copy down previous guess-timates and compare them to the most recent guess-timates, and post them here to show the revisions. (Interestingly enough, on the day the final numbers for 3rd quarter GDP came out, my IP address was blocked by the Bureau of Economic Analysis. I actually verified this through my cable company.)

In addition to the falsified unemployment numbers, the inflation numbers are highly susceptible to manipulation. They exclude home prices from the calculation altogether, using owner's equivalent rent instead. They use a concoction called hedonics to claim that the real value of certain items is actually higher than the selling price in a store. Thus the prices of these items contribute to a reduction in inflation. Inflation, and its use in the GDP price deflator, has a huge effect on real GDP. And, surprise, surprise, the GDP deflator has been calculated at about 1/2 as much as it was in early 2006. (the GDP deflator has gone from 3.3 down to 1.7 or 1.8) Thus the same current dollar GDP gives a much higher "real" GDP due to this manipulation.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[Jack Rabbit]

10. There was a recovery?

[unlawflcombatnt]

11. Only in the Alternate Reality World of the NeoCon-Artists

And maybe for the top 1%.

Investors have plenty of capital to invest. But consumers do not have plenty of money to spend to create productive investment opportunities for that capital.

So that abundant capital is invested in non-productive, and even counter productive endeavors, like building factories in China to put even more American workers out of jobs.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[kineneb]

13. sure looks like it

just on the housing fiasco:

Check out the links here...
http://patrick.net/housing/crash.html#links

and

from this link (on that page):
http://centralvalleybusinesstimes.com/stories/001/?ID=4767&ref=patrick.net


"Planned job cuts plunged to a eight-month low in March, but troubles in the home-building sector continued to take a toll, with the housing-related industries of real estate, construction and mortgage lending announcing nearly as many job cuts in the first three months of 2007 as in all of 2006, according to figures released Wednesday by outplacement consultancy Challenger, Gray & Christmas Inc.

Employers announced 48,997 cuts in March, 42 percent fewer than the 84,014 job cuts in February and the lowest level since last July (37,178), Challenger says.

March was 25 percent lower than in the same month a year ago, when 64,975 job cuts were announced, according to the Challenger report.

But job cuts in housing-related industries (real estate, construction and mortgage lending) surged 346 percent to 21,245 from 4,764 in the first quarter a year ago. The first-quarter total for these three sectors nearly matches the 2006 total of 22,814."

<snip>

Sure seems a lot of folks are losing their jobs... they won't be buying any new appliances, etc., really soon.

Gotta' get that garden planted soon.

[unlawflcombatnt]

15. Good Link to Patrick.net

Patrick.net has great links to housing info. It's interesting to read about all of these Construction job losses, and then see the dubious +56,000 increase in Construction employment in today's government payroll employment report. It seems to me someone has a counting problem on Construction employment. Or an "honesty" problem. I suspect the latter, and I suspect the problem is with the Bush-controlled government's numbers.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[Clarkie1]

14. No. nt

[unlawflcombatnt]

16. Severe Recession Certain: Peter Schiff

In an April 5, 2007, article titled No More Legs to Stand On, Peter Schiff explains why a severe recession is an outright certainty. Below are some excerpts from the article.


"For those not lost in the inconsequential minutia, a severe recession is an outright certainty, regardless of what current statistics might indicate on a day-to-day basis.

Since the bursting of the dot.com bubble, the U.S. economy has been fueled by an enormous consumer spending spree. This largess has been artificially propped up by the largest real estate bubble in U.S. history. In fact, housing has acted as a three-legged stool upon which American consumers have been precariously perched. Those legs are: 1) home equity extractions; 2) adjustable rate mortgages; 3) the wealth effect....

These three factors combined to encourage consumer spending on an unprecedented scale relative to incomes, and allowed debt to rise to levels that would have been impossible had mortgage payments been fully amortized and real estate prices remained at historically reasonable levels. Of course, many economists confused this spending binge with legitimate economic growth, just as they confused rising home prices with increased savings. However, as with the dot.com bubble, the truth only becomes apparent to the inebriated when the punch bowl runs dry....

it is important to point out that as a collapse in consumer spending ushers in a recession, the Fed will not have the luxury of lowering interest rates to cushion the fall. Despite surging unemployment, “inflation” will only accelerate, as extreme dollar weakness abroad translates into higher consumer prices at home. In addition, long-term interest rates will be headed higher as well, as foreign savers look to be compensated for this loss of purchasing power. Higher interest rates and substantial increases in the cost of living will only exacerbate the housing downturn and the recession, turning what would normally have been simply a severe recession into something far worse.

Although this may sound like a sobering scenario, it is definitely not the worst case. The real doomsday would only come as a result of Fed-created hyper-inflation which could be used to pump up all varieties of falling asset prices. Let’s hope the boys at the Fed decide not to go there."


The full article can be found at http://www.europac.net/newspop.asp?id=8224

[unlawflcombatnt]

17. Clinton Economy vs. Bush Economy

After overhearing the Larry Kudlow propaganda hour today, and the comparison of the Bush economy vs. the Clinton economy, it seemed necessary to restate some of government-documented statistics. During Bush's Clinton's last 6 years in office, 12.9 million new jobs were created. In Bush's 1st 6 years, 8.3 million jobs were created. That's a difference of 4.6 million, or over 50% more under Clinton. This can be seen from the graph below from the Bureau of Labor Statistics. The key numbers are underlined in red.



Not only were far fewer jobs created under Bush, real hourly wages increased only 1/2 as much. During Bush's 1st 6 years, real wages (measured in 1982 dollars) increased $0.27/hour. During Clinton's last 6 years, real wages increased $0.55/hour, or twice as much. This can be seen from the chart from below from the BLS.




It's also worth showing the decline in the hours in the average workweek. This, along with minuscule real wage increases, further refutes claims of a strong job market, or a strong economy. Below is chart of change in the average hourly workweek.



It's just amazing to see the Kudlow-ish blowhards claim the Bush economy is better than the Clinton economy. There aren't any facts or statistics to support that point of view. This seems to be the hallmark of the Bush economy. The media propagandists provide nothing but fact-free reporting, supported by nothing but hot air.

[tsuki]

18. I think that it has not hit in full because the public is being misled.

The feeling here is that although construction is slow, things are turning around. And the promise of the retiring "baby boomers" in 3-4 years will turn things around.

I think those "baby boomers" who have the cash have already retired, and the market will be flat for at least a decade.

But then, I am a left wing, doom and gloomer, pinko, fascist, commie lib'rul who wants America to fail. :sarcasm:

[unlawflcombatnt]

19. I'm in the same club

"I think that it has not hit in full because the public is being misled."

This is exactly what the problem is. And the mainstream Right-Wing Corporate media is working overtime at deceiving the public. It's in their best interests to keep consumers misinformed, so they'll continue spending and maintain Corporate profits.

[tsuki]

20. And because I remember the 1980's, I have prepared, hopefully.

I cannot think what will happen to those that have not. It is much worse than the 80's.

[ProudDad]

21. As far as working class Americans are concerned

the Recession of 2001 never left...

[unlawflcombatnt]

22. I completely agree

All that's kept the economy alive since 2001 is real estate and consumer spending. And both were fueled by increased borrowing ability, not by consumer spending financed by real income or wages.

And now all of the phony money created through "innovative financial instruments" is starting to shake out. Without overinflated assets to borrow off of, consumers are not going to be able to maintain their current spending levels. Now that the short burst of real wage increases has ended, there's nothing left to maintain consumer spending increases, nothing left to fund consumer demand increases; and without consumer demand increases, there's no increase in demand for workers to fill production demand increases.

unlawflcombatnt

Economic Populist Forum

[leftofthedial]

23. the "recession" arrived in 2001

but it was a foregone conclusion in 2000 when dick and george started talking about needing tax cuts because the economy was so good

(you know, before they started talking about needing tax cuts because the economy was so bad)


and it has continued unabated ever since

the oligarchy's economic numbers are as phony as whatever the latest lie is that they are telling for whatever the latest scandal is they've been caught in

[unlawflcombatnt]

24. Exactly

"the oligarchy's economic numbers are as phony as whatever the latest lie is that they are telling for whatever the latest scandal is they've been caught in"

You're absolutely right. The economy is being kept afloat on "hot air" alone. Though Durable Goods Orders increased for the month of March, they are down -3.1%. The Housing Industry is in complete free fall, with the annualized home sales rate for March of 2007 falling 550,000 from March 2006. Though real wages increased for a short time in 2006, they have now begun declining again, and are now less than they were in October 2006.

The only element of the economy that is "increasing" is the stock market, and that's due to overoptimism, and to a lesser extent from short-term profit increases from labor cost reductions due to mass layoffs and wage stagnation.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[unlawflcombatnt]

25. Real Personal Spending DECLINES -0.2%

Yesterday's Personal Income & Spending showed a monthly DECLINE in real Personal Consumption Spending of -0.2%. The report was deceptively interpreted as "positive" economic news, though even the "nominal" (non inflation-adjusted) increase of 0.3% was only 1/2 the of the 0.6% increase predicted. Though nominal wage & salaries increased 0.7%, the Consumer Price Index increased 0.9% for the month of March on an annualized rate. Below is a copy of Monday's Personal Income & Spending Report from Briefing.com. Previous numbers are in parenthesis next to current numbers. The "real," inflation adjusted numbers are underlined in red.




It appears that spending is finally starting to decline as result of declining home equity-financed spending combined with stagnant real wage growth. The housing bubble is bursting, and there's nothing on the horizon to take its place. The 1st quarter GDP growth of only 1.3% is not surprising, given the decline in real consumer spending. And this decline was predictable, given the combination of declining home equity extraction and stagnant real wages.

The only things rising are prices and Corporate media propaganda.

unlawflcombatnt

Economic Populist Forum

[unlawflcombatnt]

26. Real Personal Spending DECLINES -0.2%

Yesterday's Personal Income & Spending showed a monthly DECLINE in real Personal Consumption Spending of -0.2%. The report was deceptively interpreted as "positive" economic news, though even the "nominal" (non inflation-adjusted) increase of 0.3% was only 1/2 the of the 0.6% increase predicted. Though nominal wage & salaries increased 0.7%, the Consumer Price Index increased 0.9% for the month of March on an annualized rate. Below is a copy of Monday's Personal Income & Spending Report from Briefing.com. Previous numbers are in parenthesis next to current numbers. The "real," inflation adjusted numbers are underlined in red.



It appears that spending is finally starting to decline as result of declining home equity-financed spending combined with stagnant real wage growth. The housing bubble is bursting, and there's nothing on the horizon to take its place. The 1st quarter GDP growth of only 1.3% is not surprising, given the decline in real consumer spending. And this decline was predictable, given the combination of declining home equity extraction and stagnant real wages.

The only things rising are prices and Corporate media propaganda.

unlawflcombatnt

Economic Populist Forum

[AtomicKitten]

27. the forecast is gloomy

hard to believe it can get worse