Economic Analysis
6/26 - So how should we view the current state of the economy? Should we be optimistic like the Eagles or join the disciples of Lord Keynes in the pessimists camp? The US economy, despite the improving economic statistics, remains in recession and predicting a robust recovery would seem to be unrealistic in the extreme. And yet the contrarian in me feels uncomfortable adopting the mainstream view that this recovery will be meek and mild like the recovery from the last recession. So is there any reason to believe that a sharp recovery is in our future? The answer is an unequivocal yes….and no. Yes, over the next couple of years we could see a sharp recovery from the credit market, government induced cliff dive of the last 9 months. And no, in the longer term, the US economy is likely to produce growth that is less than the long term average of roughly 4%. Read more….
Alhambra Investments tracks and analyzes key economic reports and indicators on a daily basis. Below are charts to several of the most compelling indicators, as well as archives of the most recent reports analyzed:
Economic Charts
Hours worked are rising. This has to happen before we get significant job growth.
Civilian employment from the household survey did show a gain last month.
Payrolls have bottomed but aren't rising yet.
Capital goods orders are rising which bodes well for business spending.
Durable goods orders are rising off the bottom.
Obviously the deficit is awful but the more interesting aspect of this chart is how the budget stayed near balance until we severed the dollar's link to gold. A gold standard provides budget discipline.
Banks are buying government securities rather than lending.
No sign of an increase in lending yet.
The ISM manufacturing index points to strong growth.
New home sales are back near their lows.
Consumption is rising again.
The savings rate ticked higher last month. I'd like to see it even higher. The sooner we rebuild savings the sooner we reach a real recovery.
Real Disposable income continues to rise.
The non manufacturing ISM is not as strong as its manufacturing counterpart. This will need to improve if the recovery is to extend beyond inventory rebuilding.
Unit labor costs are falling which should be positive for employment.
Productivity has risen sharply which is positive for corporate profits.