Not a Positive Economic Picture

For months now, there's been considerable debate about whether the U.S. economy is on the road to recovery.

Bulls point to the massive monetary and fiscal stimulus that's been pumped into the economy, the sharp rebound in share prices, and the relative improvement in certain indicators as a reason for optimism.

Bears -- like me -- note the persistent negative sentiment on Main Street and in many corporate boardrooms, the steady increase in foreclosures, personal bankruptcies, and the ranks of the long-term unemployed, and the numerous imbalances -- including still-very-high levels of public and private debt -- that remain unresolved.

So who's right?

Chances are that we won't know the right answer for some time. Historically, sustained economic recoveries have not been fully recognized until well after the fact.

But one way to get a sense of where things stand is to look at how things are playing out relative to the past. On that basis, the notion that the economy is back on track leaves a lot to be desired.

To cite one example, Calculated Risk regularly updates and publishes a chart, "Percent Job Losses in Post WWII Recessions," which reveals that the current pace of job losses is more severe and persistent than during all prior postwar downturns.

Another chart featured in a recent report by the Rockefeller Institute of Government, "Recession or No Recession, State Tax Revenues Remain Negative," (hat tip to The Business Insider) paints a similarly disturbing picture of the recent trend of real -- inflation-adjusted -- retail sales.

In fact, using data from Bloomberg, I put together several graphs that show how key economic indicators -- including new home starts, industrial production, durable goods orders, and consumer credit outstanding -- have fared during every downturn -- including the present one -- since April 1960.

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As you can see, the pattern in each chart resembles the one apparent in the earlier examples: things are generally worse now than they were at the same point during prior episodes.

Interestingly, when you compare the current trend of the stock market -- an indicator that many bulls have been fixated on -- to those that unfolded during past recessions, it has also come up short, despite the near-70 percent rally we've seen in the S&P 500 index since the March 2009 lows.

Of course, there's more to reading the economic tea leaves than charts alone.

Or so many of the bulls seem to think.

Comments

[Rick]

Long term unemployment is mentioned, and it makes a dramatic graph as well:

http://web.cecs.pdx.edu/~rc/index.html#LongTerm

[Don]

Nice piece of work. I wonder what is supposed to replace housing or autos as an additional source of income? What could possibly replace housing or autos as a source of real growth? I can't think of anything. Subsidizing doesn't work long term. The former Soviet Union and Cuba taught U.S. that.

I vote we open those UFO files and get to work on something new. I want a pad in the sky and a flying car, NOW !

[Matt]

I agree Don, that has to be the next big boom!

They can say recession or no recession but until everyone has full employment, we are going no where.

[don]

just for the hell of it ..........lets all start looking at the products we buy turn it over and read fully and try to buy made in usa stuff,i know its simple and the company may be owned by non-us citzens but thats all we got right now lets try to keep what we have so in short BUY AMERICAN ~ tndudeman

[Dollar4Silver]

I always look for products made in the USA and really can't find any. They say packaged in USA but made in China. The only thing I thought was made in the USA was a bag of weed, but even that was made in Canada. We're screwed.

[Mark G.]

Market cap in US equities has increased by $5 trillion since March. Fed rates are at zero. Banks are holding record amounts of cash. US corporations are holding record amounts of cash, yet this is all the bang for our buck we get?

Now there is a $120 billion jobs bill on the way, cash for caulkers if you will. Why does anyone believe more stimulus is needed or helpful? The above mentioned items are a massive stimulus worth trillions of dollars and aren't stimulating much of anything other than speculation. Liquidity trap?

[Patrick]

Those graphic are very amazing. The recession is slowly going aways but nothing is yet done. The dept is simply too much to believe that everything is back to normal. Gold might go up now but it's not for nothing... people fear a down trend.

[Digby]

Yes, no country, not even the USA can keep buying more from overseas than it sells.
And until real productive useful jobs start being created the economy will stay bad.

[ab initio]

These charts show graphically that Helicopter will print more and more money. And Obama will borrow more and more for even more stimulus packages.

In the mean time we will get more kabuki in DC like the Angelides Commission and ideas to "tax" banks but the reality is that other than exploding debt and government guarantees Wall Street will continue to rule the roost. The only open question is the timing of the funding crisis.

[Rob Buller]

It's a shame the 1930's recession statistics are not plotted too just to complete the picture.

[Michael Panzner]

I agree. Unfortunately, much of the economic recordkeeping we are familiar with nowadays began after the Great Depression.

[NanceFinance]

The unemployment picture may be even graver than the chart above shows. David Rosenberg notes that the gap between the number of jobs ADP reports vs the nonfarm payroll is 648,000. Typically, the gap is only 120,000, he says. Look for downward possible revisions to the NFP number.

[Ced]

I found something wonderful actually manufactured in the USA ! :-)
I thought they were making it in China but no... pure product of Arizona.

www.tantrachair.com

[anonone]

This economy is going to come barreling out of this recession like gang-busters. Boo-Yah !! This time *is not* any different.