US Treasury Secretary Tim Geithner posted an "interesting" op-ed in yesterday's NY Times: "
Welcome to the Recovery."
Welcome to the Recovery
By TIMOTHY F. GEITHNER
NY Times Op-Ed
August 3, 2010
THE devastation wrought by the great recession is still all too real for millions of Americans who lost their jobs, businesses and homes. The scars of the crisis are fresh, and every new economic report brings another wave of anxiety. That uncertainty is understandable, but a review of recent data on the American economy shows that we are on a path back to growth...
Meanwhile, back on planet Earth...
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------THE "GOOD" NEWS...------
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AUTO SALES...
We were told automotive sales were up significantly, versus July of 2009. But, moments later, the number was revised downward, below 12 million.
U.S. Light Vehicle Sales 12.1 Million* SAAR in July"
Calculated Risk
August 3, 2010
UPDATE at 5:25 PM ET, 8/3/2010: AutoData revised their estimate to 11.98 million SAAR.
Based on an estimate from Autodata Corp, light vehicle sales were at a 12.06 million SAAR in July. That is up 7.5% from July 2009, and up 9.1% from the June sales rate...
The post continues on to tell us this is only an estimate which will then be revised at a later date (in addition to the "estimate" which came out an within an hour or two after the original announcement, which bumped the number over 12 million for a few minutes...just in time for the press to run with that figure) by the Bureau of Economic Analysis.
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PERSONAL SAVINGS...
Consumers Saving More Than Thought
By CATHERINE RAMPELL
Economics Editor
New York Times
August 4, 2010
A new government report released on Tuesday showed that consumers saved 6.4 percent of their after-tax income in June, and that this savings rate had shot up as high as 8.2 percent in May 2009. Before the recession, the rate had hovered at 1 to 2 percent for many years...
IMHO, these consumer savings statistics are somewhat of a sham. As I've noted it's (and referenced in the past) really all about the upper class saving money, and nobody else, these days.
I mean, let's get real here, please: How much did you save in the last quarter?
(If you earn more than $250,000 per year, your answer doesn't count. And, if you earn between $100,000 and $250,000 per year, the value of your answer is somewhat discounted.)
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------"THE BAD NEWS..."------
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GROSS DOMESTIC PRODUCT (G.D.P.)...
Remember the spin swirling around the country's Gross Domestic Product (G.D.P.) quarterly report late last week?
Second Quarter G.D.P. Was Probably Worse Than Reported
By CATHERINE RAMPELL
Economics Editor
NY Times Economix Blog
August 3, 2010, 7:27 pm
The economy most likely grew much less in the second quarter of 2010 than initially estimated.
On Friday, in its preliminary estimate of gross domestic product, the Bureau of Economic Analysis said it believed the economy grew at an annual rate of 2.4 percent last quarter...
--SNIP--
...G.D.P. numbers go through several revisions as the bureau receives more complete data, and it now looks as if the revisions may be significant. According to the June factory order data, released today, the number the bureau used to calculated the inventory component of G.D.P. was badly off.
We're told by Ms. Rampell that, according to [https://mm.jpmorgan.com/stp/t/c.do?i=101D3F-1042&u=a_p*d_452671.html THIS] report from J.P. Morgan (and many others like it) "...the second quarter G.D.P. number will be revised downward from 2.4 percent to somewhere around 1.7 percent."
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HOUSING/MORTGAGES...
Pending Home fall to record series low in June
Calculated Risk
August 2, 2010
From the NAR: [http://www.realtor.org/...
Pending Home Sales Ease in Post-Tax Credit Market]
The Pending Home Sales Index, a forward-looking indicator, declined 2.6 percent to 75.7 based on contracts signed in June from an upwardly revised level of 77.7 in May [revised from 77.6], and is 18.6 percent below June 2009 when it was 93.0. The data reflects contracts and not closings, which normally occur with a lag time of one or two months. This decline was expected and suggests existing home sales - reported at closing - will fall sharply in July and probably a little further in August.
--SNIP--
Yes, the months-of-supply will be in double digits, and that will put downward pressure on prices.
Note: This is a record low for this series that started in 2001.
Bold type is diarist's emphasis.
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SMALL BUSINESS...
(DIARIST'S NOTE: Diarist is authorized, in writing, by Naked Capitalism Publisher Yves Smith to reproduce her blog's diaries in their entirety.)
Small Business Sentiment Hits New Low
Yves Smith
Naked Capitalism
Tuesday, August 3, 2010
Reader Scott provides yet another example of the disconnect between the cautiously optimistic stock market and those on the economic front lines. A Wells Fargo/Gallup survey of 604 small business owners conducted in early July showed a plunge in already negative readings to new lows. This gloomy outlook matters because small businesses were the biggest source in job creation in the last upturn and are expected again to be the main source of hiring.
CHART: Wells Fargo/Gallup Small Business Index
Even worse, small business owners expect things to get worse. The main reason for the decline in the index was the decay in the Future Expectations subindex, which is the first time business owners as a whole have been negative about their companies' prospects for the upcoming year:
CHART: [42% of respondents anticipate it will be "somewhat" or "very difficult" to borrow, and 22% forecast their financial condition a year out as "somewhat" or "very bad." Wells Fargo/Gallup Small Business Index -- Future Expectations Dimension]
Gallup noted:
The Wells Fargo/Gallup Small Business Index seems to be something of a precursor of future economy activity. It peaked at the end of 2006; matched that peak once more in June 2007; consistently declined thereafter as the recession deepened, before bottoming out in mid-2009; and finally, improved modestly until its July 2010 decline.
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MANUFACTURING...
ISM survey confirms sharp slowdown in US economy
Gavyn Davies
Financial Times Blog
August 2, 2010 4:48pm | Share
The ISM Survey of the US manufacturing sector (published on Monday) offers the first reliable glimpse of activity in the US economy in the third quarter of the year. It is not encouraging.
Although the headline reading was rather better than widely anticipated (an out-turn of 55.5 compared to 56.2 in June), the details of the survey showed that new orders are now slowing markedly, and inventories have started to rise more rapidly than companies may be intending. Taken together with the GDP data for Q2 (discussed in an earlier blog), the ISM survey points to a significant danger that the US economy will continue to slow sharply in the months ahead...
--SNIP--
The headline figure for the manufacturing sector in July had been expected to fall to about 54.5, but in fact it fell only to 55.5, down by 0.7 on the previous month. Although superficially encouraging, the details lying behind the headlines were much worse than expected.
--SNIP--
CHART: US ISM Survey And Key Lead Indicator (The Lead Indicator Is ISM New Orders Less Inventories)
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CONSUMER SPENDING...
Consumer Spending Stagnates In June, NY Times, 8/4/10
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PERSONAL FINANCES...
Personal Bankruptcy Filings up 9% in July, Calculated Risk, 8/3/10
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CONSTRUCTION...
Private Construction Spending Declines In June, Calculated Risk, 8/2/10
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------THE "UGLY" NEWS...------
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Here are some of the pundits' reactions to Mr. Geithner's industrial strength spin about our "recovery," as he's been speaking about it for many days, and also as he waxed poetically about it in yesterday's NYT...
Brad DeLong on Mark Thoma...
Department of "Huh?!" (Has the Obama Administraton Lost Its Mind? Department)
July 25, 2010
Mark Thoma is, politely, puzzled:
Reverse Psychology?: Instead of a series of op-eds by Christina Romer, Larry Summers, Jared Bernstein and other members of the administration making a strong, strong case for more stimulus -- particularly that devoted to job creation -- along with the president himself making the case to the nation, the appearance of key administration officials on Sunday talk shows to bolster the effort, and so on, the administration has decided to try and sell a recovery that hasn't yet taken hold.
Thus, instead of a much needed and impressive effort to move Congress to action, or at least make clear to voters who is and who isn't trying to help those struggling with the recession, here's Timothy Geithner saying it's time for the government to back off because a solid recovery is underway...
Paul Krugman...
Always Look On The Bright Side
Paul Krugman
NY Times Blog
August 3, 2010
...I'm still somewhat amazed to see Tim Geithner's happy talk in today's Times.
Here's the reality: the stimulus was too small; we're not seeing growth at a pace that will bring unemployment down rapidly, if at all; we clearly should be doing more; but obstructionism from Republicans is preventing action. And the administration knows all this perfectly well.
So one way to play this politically would be to tell the truth, and try to place the onus on Republicans, accusing them of perpetuating high unemployment.
Instead, however, the administration has decided to engage in happy talk, saying that it's all good...
Robert Reich...
The Obama Agenda and the Enthusiasm Gap
Wall Street Journal Blog
By ROBERT B. REICH
AUGUST 3, 2010
In case after case, the administration went far enough to fuel the opposition but not far enough to provide immediate help to the average voter.
Whatever the outcome of the upcoming midterm elections, the activist phase of the Obama administration has likely come to a close. The president may have a fight on his hands even to hold on to what he's already achieved because his legislative successes have been large enough to fuel strong opposition but not big enough to strengthen his support. The result could be disastrous for him and congressional Democrats.
Consider the stimulus package. Although it's difficult to separate the consequences of fiscal and monetary policy, most knowledgeable observers conclude that the stimulus has had a positive effect. Real GDP is now increasing at an annual rate of 2.4%, and although the recovery is still fragile it's unlikely we'll fall back into a full-fledged recession.
Yet the official rate of unemployment remains above 9%, not including millions either too discouraged to look for work or working part-time when they'd rather have full-time jobs. Almost half of the jobless have been without work for more than six months, a level not seen since the Great Depression.
--SNIP--
...He may yet surprise. He is, as he reminds us, a most improbable president.
Dean Baker...
The US economy is not yet on the road to recovery
Dean Baker
guardian.co.uk, Monday 2 August 2010 19.00 BST
Getting the economy growing at a more rapid pace will inevitably require another round of stimulus from the government
The 2.4% GDP growth figure reported for the second quarter caused many economists to once again be surprised about the state of the US economy. It seems that most had expected a higher number. Some had expected a much higher number. It is not clear what these economists use to form their expectations about growth, but it doesn't seem that they have been paying much attention to the economy. For those following the economy, a weak second quarter growth number was hardly a surprise.
--SNIP--
The economy has been going through a classic inventory cycle in the last five quarters. Inventories had been shrinking rapidly in the second quarter of 2009. This is standard in a recession as firms look to dump a backlog of unsold goods. Inventories shrank less rapidly in the third quarter, which means they added to growth. Inventories started growing again in the fourth quarter, and growing rapidly in the first two quarters of 2010. Inventories added considerably to growth in these quarters, making GDP growth considerably more rapid and erratic than the growth of final demand.
The growth in final demand over the last four quarters has been very even and slow. It has averaged 1.2% over this period with a peak growth rate of 2.1% in the fourth quarter of 2009. Growth was just 1.3% in the most recent quarter.
The numbers of final demand should be of great interest since it is unlikely that inventories will provide any substantial boost to growth in future quarters. The second quarter rate of inventory accumulation was already quite fast, so future inventory figures are as likely to come in lower as higher. This means that GDP growth over the next few quarters is likely to be close to the rate of growth of final demand.
This should have policymakers very worried...
So, according to Baker, with G.D.P. at 2.4%, and with inventory restocking having come to an end, policymakers should be very worried.
I wonder what Baker's thinking as he's reading about how the 2.4% quarterly GDP number--as it was announced on Friday--has now decreased to an estimated 1.7%?
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(And, the BLS' July Employment Situation Report is being delivered to the public on Friday morning.)
Yeah, it's all about our Treasury Secretary's good intentions--as he put it in his op-ed, yesterday--on our "path to recovery." And, of course, we all know just where those paved paths of good intentions lead, right?
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MY APOLOGIES TO THE COMMUNITY FOR THE BLATANT THREADJACKING THAT'S OCCURRING IN THE COMMENTS. I deal with this all the time; but, today's episode is a virtual case history for the community. I've never noted it in a diary, before today, but it's quite inconsiderate to other members of the community that are here to make a genuine contribution the conversation.