Is the Recovery Fizzling?

There are a whole lot of reasons to be concerned about the economy.

That is the gist of this article from the AP,

WASHINGTON — Concerns are rising that the economic rebound is stalling, but a strong jobs report on Friday would go a long way toward assuaging those fears.

Conversely, a report showing private employers failed to create many jobs in June will amplify worries that the recovery is weakening and won’t be strong enough to put many of the 15 million unemployed back to work anytime soon.

Well, the BLS released its jobs report and the situation is not so good as Dave Schuler notes,

Essentially, the situation is unchanged. The unemployment rate decreased because fewer people were even looking for jobs. That’s not a good thing. Another thing concerned me: the average work week declined to 34.1 hours. That doesn’t sound like hiring is likely to begin soon.

On top of this the non-farm payroll declined 125,000 in June. Now part of that is likely due to Census workers being let go, still the expectations according to the AP article is that job losses would be kept to 110,000 with the private sector adding 125,000 jobs. Instead the private sector added only 83,000 jobs. So not very good news. By itself it isn’t horrible, but that isn’t the only bad news.

The AP articles cites other data that is cause for concern,

More than 1.3 million people have been left without federal jobless benefits after Congress adjourned without an extension. That number could grow to 3.3 million by the end of the month if lawmakers can’t resolve the impasse when they return.

[…]

Manufacturers reported Thursday that export orders grew at a slower pace in June than the previous month. New surveys suggested growth in China is slowing, which could lead it to import fewer American products.

Meanwhile, governments in the United States and overseas are cutting spending and reining in stimulus measures. Some economists worry those steps are premature as long as the economy remains weak.

There was also another fresh sign of trouble in the housing market. The number of buyers who signed contracts to purchase homes tumbled 30 percent in May, the National Association of Realtors said. Construction spending also declined for the month. Both were affected by the expiration of government incentives to buy homes.

Looks like the credit for first time buyers was a lot like Cash for Clunkers; moving future purchases forward and when the program ends so does the temporary boost in activity. Undoubtedly the program will be hailed as a stunning success.

But wait, the bad news is not over with yet…jobless claims. Yesterday the Department of Labor reported that first time jobless claims rose last week by 13,000 to 472,000.

Now it isn’t all bad, according to the Institute for Supply Management the manufacturing sector has had growth for 11 months and that while growth in June was lower than in May it is not unexpected given previous high growth rates. Similarly for the non-manufacturing sector, but with a shorter period of consistent growth, 5 months. Back on June 17th the Conference Boards LEI (Leading Economic Index) was up 0.4% with the Coincident Economic Index also was up 0.4% in May.

So a stalling recovery? Double dip recession? Hard to say, but I think there are reasons to be concerned.

FILED UNDER: Economics and Business
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Steve Plunk says:

    I expect a jump in business and consumer confidence in early November. It won’t be huge as the executive branch will remain unchanged but at least we can expect some push back form congress.

    We have an anti business president. It’s plain to any of us who run a business he is interested in growing the public sector at our expense. Because of our recognition of the obvious businesses are still hunkering down, avoiding hiring, holding off on capital expenditures, and praying we can stay in business long enough to see a change.

  2. c.red says:

    Seems to me to show that the stimulus has more or less been keeping the economy afloat.

    We can let up now or we can go back into the death spiral of 2008.

  3. john personna says:

    I can only think that Steve Plunk wants me to forget history. I should have amnesia about the growth of deficit in the Bush years, the unhealthy bubbles, and the ultimate crash that occurred before Obama took office. I should forget the failed Bush stimuli. I should forget the Bush bailouts.

    No, none of that matters. All would be well (in Pretend Land) if a business-friendly President could lay hands on the economy.

  4. john personna says:

    U.S. President George W. Bush, saying “our entire economy is in danger,” urged Congress to approve his administration’s $700 billion bailout proposal.

    “We’re in the midst of a serious financial crisis, and the federal government is responding with decisive actions,” Bush said in a televised address Wednesday night from the White House.

    Bush pointed out that the collapse of several major lenders was rooted in the subprime mortgage market that thrived over the past decade.

    http://www.cnn.com/2008/POLITICS/09/24/bush.bailout/index.html

    Ah, for those lost days here at OTB when that kind of stuff was called “talking down the economy.”

  5. steve says:

    Given that so many important numbers, like household debt, were surprisingly similar to what they were right before the Great Depression, and given the global nature of the crash, a prolonged recession is what I have expected all along. I think there is still a lot of balance sheet repair going on.

    Steve

  6. Herb says:

    I blame all the hard-working successful people who have gone Galt to teach all the rest of us looters and moochers a hard lesson…….

    “We have an anti business president. ”

    Ha! Why do you say that? Because he was mean to BP after they spilled all that oil? Gimme a break. He’s the President of the United States, not Venezuela. Anti-business……yeah, if you let your radio do your thinking for you.

  7. Drew says:

    As I pointed out over at Glittering Eye, over the past 12 years we’ve had 4-14 companies in portfolio. We probably seriously look at 100 per year. We hold at least 50 meetings a year with investment bankers, who have hunderds of small business clients. The point being that we have a pretty good handle on the small business owner’s temperature. And Steve Plunk is spot on. Turtles with their heads pulled in, and with good reason.

    Oh, and speaking of history: DotCom bubble, DotCom burst. And for the motivated student, exactly when did the housing price bubble take off? It’s a readily available statistic. Hint: not during the term of the favorite whipping boy of lightweight thinkers.

  8. Steve Verdon says:

    It’s plain to any of us who run a business he is interested in growing the public sector at our expense.

    “Never let a good crisis go to waste.” Rahm Emmanuel

  9. Herb says:

    “The point being that we have a pretty good handle on the small business owner’s temperature. And Steve Plunk is spot on. ”

    Not to be too metaphorical here, but just because the long-legged supermodel is afraid of the hoodlums across the street doesn’t mean the hoodlums are going to rape her.

    I can see why small business owners are uncertain in these times….but if they want to pin it on our “anti-business president” then they should at least demonstrate some of the things he’s done to make them leery.

    Looking scary from across the street isn’t gonna cut it.

  10. john personna says:

    I’m sure Drew, that Republican cronies can blame Obama through thick and thin. It is just correlation though. As soon as they start to explain the causation, like debt and deficit, they go back to things that went out of control under GWB.

  11. Steve Verdon says:

    John,

    It isn’t about partisan politics, Obama’s policies are extensions of Bush’s policies. Bush was not opposed to bailing out GM or propping up banks, or even fiscal stimulus (tax cuts, rebates, etc. vs. spending programs). In other words, if this crisis had started earlier under Bush we might very well have seen many of the same policies we are seeing now.

    The only major difference is health care reform which many smaller businesses would likely see as being that “hoodlums coming to rape the super model” Herb is talking about. Large firms that can self-insure are likely indifferent. Smaller firms that can’t and face penalties for failing to provide insurance or facing increasing costs would see that as a move that is not helpful to said firms’ continued existence.

    Looking scary from across the street isn’t gonna cut it.

    If it makes you alter your behavior, then yes it is. If the analog for mid to small sized firms is to be extra-cautious in decisions ot expand and/or hire new/more employees then yeah merely “looking scary” can have an impact.

  12. Drew says:

    Nice try, Herb – no sale.

    Point 1. One of the things competant leaders – CEO’s, sports team managers, government figures, you name it – all realize is that they are in a special situation where their words, actions, body language etc matter. People are watching their every move. When we hire a CEO we explore this in detail. Show me a guy who doesn’t have these antennae fully developed, and I’ll show you a failure in the making. I’ve made this point about Obama since the campaign. And its manifesting itself right now. No executive experience. So predictable.

    Point 2. In point of fact, tax increases and higher employment costs are the very thing that drive business owners mad, and into their shells. And that is exactly where Obama is going. If you want to argue otherwise, have at it, but you will look like you just arrived from Mars.

  13. john personna says:

    Well, we were talking about the fizzling recovery. I didn’t think that enough in health care was coming on-line to drive that.

  14. Drew says:

    “As soon as they start to explain the causation, like debt and deficit, they go back to things that went out of control under GWB.”

    Idiotic.

    I once was a practicing engineer. Had to do “failure analysis” on large, plant scale pieces of equipment. There was always finger pointing when something went wrong. eg If the spindle running the mill broke it was of course always the fault of the operator running over limit at the time of failure. Right? But then we would go about the task of looking at the design of the spindle, the metallurgical spec of the material, radius and size issues, machining techniques, and operating loads over the life of the equipment. Invariably there were long standing and fundamental issues that were the cause of the eventual failure. Almost never was it the fault of the poor SOB operating the equipment at the time things blew up. And our recommendations always focused on correcting fundamentals. I would fall out of my chair if any other (or former) engineers at this site wouldn’t corroberate that worldview.

    I don’t know what it is with you, odo, just not very bright, not analytical, narrow life experience, slavishly partisan? WTF? Wake up. We have any number of structural issues variously 15 to 40-50 years in the making. You want to blame Bush. You look like a clown. Why do you embarass yourself like this?

  15. john personna says:

    Did you actually name a cause in that blather Drew, or did you just go on and on, trying to insult me and distract from your empty argument?

    What _exactly_ has _Obama_ done to “pull those turtle heads in?”

  16. john personna says:

    (Banksters are enjoying the ZIRP right now, the biggest giveaway possible.)

    http://en.wikipedia.org/wiki/Zero_interest_rate_policy

  17. Herb says:

    Drew,

    If we’re going off results, I think it’s clear that 8 years of Republican stewardship of the economy did more to hurt small business owners than 2 years of stimulus under Obama.

    If we’re going off fear, then yeah…you have a point.

    And it’s pretty clear, you’re going off fear. You mentioned tax increases. Where have taxes been increased? Obama’s stimulus was mostly tax cuts. Higher employment costs? I’m no expert, but I would think employment costs would be higher if the unemployment rate was lower. Unemployment at 10%? That’s a lot of talent on the market, a glut even. Where do you get the “higher employment costs” thing? From Obamacare? It hasn’t even fully kicked in, so no one can say “Obamacare put me out of business.” They can say, “Fear of Obamacare put me out of business,” but that’s not the same thing.

    As for this: “that is exactly where Obama is going. If you want to argue otherwise, have at it, but you will look like you just arrived from Mars.”

    Sorry, man, but I can’t argue against your crystal ball predictions, so I’m not even going to try. I suspect higher taxes are in our future, yes….but it won’t be because Obama’s “anti-business.” It might be because, absent massive entitlement reform, it might be necessary to keep the boat afloat.

    That said…..Anyone think a Republican victory will get us any closer to entitlement reform? No doubt it will calm the nerves of America’s skeered small-business owners. But will it make meaningful reforms more…or less likely?

    My vote: Less.

  18. Steve Verdon says:
  19. Steve Verdon says:

    Where do you get the “higher employment costs” thing? From Obamacare? It hasn’t even fully kicked in, so no one can say “Obamacare put me out of business.” They can say, “Fear of Obamacare put me out of business,” but that’s not the same thing.

    Or they could say, “Uncertainty over the impact of Obamacare on my labor costs kept me from expanding my operations.” Hence the reason why we still have unemployment at 10% even though there maybe a “talent glut” as you argue.

    I’d also say its clear you’ve never owned or operated a business. Not even sure you worked in one where you had to deal with operations either since for those who have, such decisions can sometimes have quite a lead time. That is, you plan this year for an expansion next year. So it isn’t what is going on right now that is important, but your expectations for the future too.

  20. An Interested Party says:

    So…everything else being equal…things would be better now if McCain had been elected president? The economy would be better? Small business owners would be less skittish? I mean, how much of the mess we have now can be laid at the feel of the president? And how much can be laid at the feel of his predecessors…

  21. An Interested Party says:

    Pardon my fingers, obviously the two “feel”s above should be “feet”…

  22. steve says:

    While Drew may have finally convinced me there is some merit to the (self-fulfilling) fears of business owners being a factor in slowing down business, I am not sure how big of a factor it actually is. With a pro-business Republican Congress and POTUS, job growth in the last recovery was extremely slow. Growth in the economy was mostly in the financial sector. IOW, businesses just did not grow. Fear is bad, optimism is nice, but customers with actual money to spend seems better. Frankly, I would think concerns about the whole world economy with China pulling back, the Eu tanking and the continuing concerns about the Middle East would be bigger factors.

    Looking at historical data, businesses have grown when tax rates have been substantially higher. Businesses may be worried about health care costs with ACA. Yet, folks neglect what has been happening over the last few years when rates have been increasing at a double digit clip for lots of us. Looking internationally, which economies are performing better, and are their governments business friendly with low tax rates?

    Steve

  23. Herb says:

    Or they could say, “Uncertainty over the impact of Obamacare on my labor costs kept me from expanding my operations.” Hence the reason why we still have unemployment at 10% even though there maybe a “talent glut” as you argue.

    So you’re blaming high unemployment on Obamacare now? I mean, you did use the word “hence” which implies some kind of causal relationship…

    At any rate, I think “Uncertainty over the general business environment kept me from expanding my operations” is a more accurate explanation. Granted, Obama may be guilty of doing something you don’t like. But guilty of being anti-business? Not hardly.

    I’d also say its clear you’ve never owned or operated a business. Not even sure you worked in one where you had to deal with operations either since for those who have.
    Well since my personal experience is relevant…..

    I can only say that I do work for a business. Not only do we operate independently from the president, but our expansion plans are determined by our ambitions and our efforts, not by our political ideologies. We want to make some money, dude. Not sit around waiting for a Republican to make it all better again.

  24. anjin-san says:

    Obamaesq socialism aside, we had a monster month in June, and we are not waiting for permission from Rush to make more money…

  25. anjin-san says:

    Fear is certainly playing a role in hindering the recovery. Corporations are hoarding cash, and that cash is not being put to work for capital improvements, hiring and so on. I think this as much due to the memory of the economic disaster we suffered under Mr. Bush as to anything Obama has done.

    >We have any number of structural issues variously 15 to 40-50 years in the making. You want to blame Bush

    And you want to blame Obama. What’s the diff? You are right because your ideology says you are?

  26. TangoMan says:

    At any rate, I think “Uncertainty over the general business environment kept me from expanding my operations” is a more accurate explanation. Granted, Obama may be guilty of doing something you don’t like. But guilty of being anti-business? Not hardly.

    If I have to rely on the authority of opinion to answer the question of whether President Obama is anti-business, I’d rather rely on the authority of the Chairman of General Electric rather than some dude named Herb:

    Mr Immelt also had harsh words for Barack Obama, US president, lamenting what he called a “terrible” national mood and expressing concern that over-regulation in response to the global financial crisis would damp a “tepid” US economic recovery. Business did not like the US president, and the president did not like business, he said, making a point of praising Angela Merkel, Germany’s chancellor, for her defence of German industry.

    Keep in mind that the only exposure that President Obama had with business prior to entering politics was his experience at extorting money from business. He’s shown no respect of appreciation of business and commerce for the good they do society. They were simply targets for him to extort. I don’t see that viewpoint as having changed (boot on neck) since his community extortionist days.

  27. john personna says:

    Drew has a contradictory position. He’s said in the past that he recognizes this as the result of decades of over-leveraging and consumer debt. He knows that recovery depends on restructuring consumer balance sheets. He knows consumers, at these levels of debt and unemployment, cannot go back and spend.

    But … put him in a room with cronies, and it’s all Obama’s fault. Oh, and mine.

  28. steve says:

    “I’d rather rely on the authority of the Chairman of General Electric rather than some dude named Herb:”

    LOL, let’s be honest here. The financial sector wants to go back to business as usual. They do not want any changes. I know nothing about Herb or his motivations, but I do about the Chairman of GE and his fellow CEOs. If they can effectively socialize risk, they maximize profits.

    Steve

  29. Herb says:

    “Keep in mind that the only exposure that President Obama had with business prior to entering politics was his experience at extorting money from business. ”

    Please….I know you don’t like the guy or his policies, but jeez, man….it’s not a license to indulge in witless hyperbole. “Anti-business” has a very specific meaning that some of you think to seem means “doing things I don’t like.”

    Before becoming a politician, Obama was a lawyer and a writer. He did very well for himself in both arenas; some would even call him successful. (He certainly made a lot of money at it, and well…look at him now.)

    You may think that your political opposition to his presidency erases all of that…but it doesn’t.

  30. john personna says:

    They think it means “being who I don’t like.”

  31. Steve Verdon says:

    So…everything else being equal…things would be better now if McCain had been elected president?

    I don’t believe I wrote anything indicating this.

    So you’re blaming high unemployment on Obamacare now? I mean, you did use the word “hence” which implies some kind of causal relationship…

    Yes, I think that is indeed a possibility. You are either a fool or not in the private sector if you don’t think expectations about large scale policies don’t impact business decisions. I work in the energy industry, if some sort of global warming policy is passed you want me to believe it wont have any effect on long term planning for various projects….projects where the planning can be 5 even 10 years out? Please.

    I can only say that I do work for a business. Not only do we operate independently from the president, but our expansion plans are determined by our ambitions and our efforts, not by our political ideologies. We want to make some money, dude. Not sit around waiting for a Republican to make it all better again.

    Either you are not being truthful here or you seriously misread what I wrote. I didn’t say anything about political ideologies, but about policies. Policies can and do impact business decisions. If tax on the return on investments in plant and capital went up seeing a decline in such investments wouldn’t be shocking…why? Because firms see a reduction in the return to such investments so they look for better opportunities. Nothing shocking or partisan here, just straight forward cost-benefit analysis.

    Drew has a contradictory position. He’s said in the past that he recognizes this as the result of decades of over-leveraging and consumer debt. He knows that recovery depends on restructuring consumer balance sheets. He knows consumers, at these levels of debt and unemployment, cannot go back and spend.

    But … put him in a room with cronies, and it’s all Obama’s fault. Oh, and mine.

    Not if Obama is continuing those policies that helped get us here. Then he is part of the probelm, not the solution. Is he entirely to blame? No, but he is the guy that is supposedly in charge now and setting policy, so he is likely to get more than his fair share of the blame. Is it fair? No, but then again it wasn’t likely fair to Bush or Clinton either when blame was heaped on them back when they were in the White House. If you claim you have great power and do great things, you can’t then turn around and say, “Not my fault…not entirely blame the last several guys too.”

  32. john personna says:

    No Steve. Obamacare is concurrent with these economic problems, but lacks causality. The simplest proof of that is that we are on that trajectory started before Obama was president, let alone before he launched Obamacare.

    (I get that absent facts some will claim causality, because you know, the reality is unpleasant to their sensibilities.)

    On Obama’s continuation of policies I don’t like, sure I can fault that. But to name one, low interest rates, I think it’s arguable that they really are more necessary now than they were in Bush/Greenspan years. In fact, my annoyance with Bush/Greenspan isn’t that they completely made the problem either. The problem is that they ignored it, and fueled the economy for one last unhealthy spurt before the collapse.

    That image from one of the Back To the Future movies always comes to mind. The bridge is out, and they blast on speed with the train. It is their only chance. It worked in the movies (with an “insert scifi here”), but not in real life. In real life their fueling of the housing boom even as they reduced loan oversight led to a bigger crash. A bigger crash Obama now has to ride out (as we we all).

  33. john personna says:

    Shorter: There really is such a thing as arriving at the scene, after the accident.

  34. Herb says:

    “You are either a fool or not in the private sector if you don’t think expectations about large scale policies don’t impact business decisions.”

    Let me offer a third possibility. I’m a douche. (Yeah, you thought I forgot about that one…)

    Dude, what part of my comment gave you the impression that I don’t think policy affects business decisions?

    Is it because I didn’t automatically jump on board with your “Obamacare is causing high unemployment” argument? Of course policy affects business decisions. If that was your point, then we’re in agreement.

    But that wasn’t your point, was it? Your point was that a specific policy is/was/will be affecting specific business decisions, which is perfectly legit…if you can back it up.

    So back it up.

    (Can I just say that uncertainty and risk and navigating through policy is a part of business, even in boom times? Hell, man, in 1962 there were Soviet nukes parked 100 miles off our shores, threatening the very existence of our species. Either they made entrepreneurs out of sterner stuff in those days, or the “entrepreneurs” of today who are scared of Obama are flat out yella.)

  35. […] a picture that isn’t that compelling in regards to stimulus spending. Especially now that the recovery appears to be losing momentum, if we were to use the VAR method above we’d ascribe all of that fizzling to the stimulus, […]