We know that they weigh a variety of economic indicators, including Employment, Industrial Production, Real Income, and Real Retail Sales (tracked here at the St. Louis Fed). Business Cycle Dating Committee member Jeffrey Frankel likes to look at aggregate hours, too. In the real world, all of this is mostly an academic exercise in any event — Americans, like Associate Justice Potter Stewart once famously said on a different topic altogether, know a recession when they see one, and they also generally have a pretty good idea when it’s ended.  (I take pride in having nailed the NBER’s call that the recession began in December 2007 while blogging elsewhere.)

But what about GDP? How does it figure into the equation? We’ve had two consecutive quarters of growth, including the 5.9 percent of Q4 2009. How will that play?

Well, it’s a interesting question, as the NBER has very contradictory and conflicting information at its own website about how it weighs the evidence:

In announcing the 2001 recession, the NBER said (emphasis mine):

Because a recession influences the economy broadly and is not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The traditional role of the committee is to maintain a monthly chronology, so the committee refers almost exclusively to monthly indicators. The committee gives relatively little weight to real GDP because it is only measured quarterly and it is subject to continuing, large revisions.

Got that?  Okay, let’s move on.

October 21, 2003 Memo from the Committee (not coinciding with a peak or trough announcement; emphasis mine):

The committee views real GDP as the single best measure of aggregate economic activity. In determining whether a recession has occurred and in identifying the approximate dates of the peak and the trough, the committee therefore places considerable weight on the estimates of real GDP issued by the Bureau of Economic Analysis of the U.S. Department of Commerce. The traditional role of the committee is to maintain a monthly chronology, however, and the BEA’s real GDP estimates are only available quarterly. For this reason, the committee refers to a variety of monthly indicators to determine the months of peaks and troughs.

Although the Committee qualifies its October 2003 remarks by mentioning the need to maintain a monthly chronology, the two comments nonetheless seem contradictory to me, and flip-flop the importance of what is to be considered.

Whichever way they eventually call it, the NBER will have a document to which it can point to support its decision.  Is it time — or long past — to formalize what it means to be in, or out of, recession?  If so, my vote might easily go to the Chicago Fed’s National Activity Index.

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The Chicago Fed provides the following bogeys:  ”A CFNAI-MA3 value below –0.70 following a period of economic expansion indicates an increasing likelihood that a recession has begun. A CFNAI-MA3 value above –0.70 following a period of economic contraction indicates an increasing likelihood that a recession has ended. A CFNAI-MA3 value above +0.20 following a period of economic contraction indicates a significant likelihood that a recession has ended.”  It is an excellent indicator.

The future is never as dire looking as the survivalists make it out to be. Even though I know the cyclical bull rally within the longer bear will eventually end with a significant correction of ~25%, I have been playing this on the long side. That’s optimism!

I lived through the 1970s — an era of sky high interest rates, ugly cars, polyester and disco — so I now how bad life can get in the USA.

My motto: Hope for the best, but be prepared for the worst.

With that thought in mind, let’s have a look at a long term chart that is actually encouraging. It comes from the book “The Next Hundred Million: America in 2050.” Many people are surprised to learn that America “boasts the highest fertility rate: 50 percent higher than Russia, Germany or Japan, and well above that of China, Italy, Singapore, Korea and virtually all of eastern Europe.”

In terms of economic development, this demographic factor provides a long term advantage — think of the financial bulge of the Baby Boomers (while ignoring everything else they screwed up).

That leaves us with this chart, which has potenetially long term, positive connotations:

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Labor Force Growth (growth in age 15-64)

Chart courtesy of Joel Kotkin

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Hat tip Kevin!

What makes them so interesting to me is that they are not economists — they are simply number geeks trying to analyze U.S. consumer data in real-time. The goal is to uncover macro-economic trends by using different data then everyone else.

Rick Davis runs the place. He is a physicist enamored with what numbers say — and he is less than impressed with what the economics profession does:

My real gripes with the established economists are their lack of innovation. The lags and revisions in their data drive me crazy. There are enormous amounts of real-time data available that hardly anyone knows how to analyze. Our current problem is that we are so far ahead of the traditional data sources that hardly anyone takes us seriously.

Here is an example of a recent chart they have produced:

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Source: Consumer Metrics Institute

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Its not all good news: Their daily economic data of the ‘demand’ side of the economy has been shrinking at an annualized rate of over 1.5% during the trailing quarter. They expect this contraction will flow down to the ’supply’ side of the economy over the next few months, with the lagging GDP shrinking in the second quarter (see this chart).

Here’s the down and dirty:

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The trendline for Debt-to-Income is at about 114% which, absent rising Personal Disposable Income, implies a need to shed an additional $1.5 trillion in liabilities.

A (bullish) wirehouse has come out with some observations, among them this troubling nugget:

Household assets rose 1.0%, or $657 billion, to $68.2 trillion. The rise in assets was driven entirely by financial assets – the continued recovery in the equity market. Household equity assets rose 4.6%, or $534 billion, to $12.1 trillion. Meanwhile, in a sign that the recovery in home prices may have run out of steam, the value of real estate assets fell 0.3% to $18.2 trillion.

I do not find it at all heartening that the “rise in assets was driven entirely by financial assets,” as it goes without saying that leaving our collective fate to the whim of the markets can prove a bit problematic (see: 2008).  It’s also disheartening — though certainly no surprise — that “the recovery in home prices may have run out of steam.”  And that’s coming from bulls!

If time allows, I’ll take a deeper dive into the report.  It is always chock full of goodies and among my favorites to dig into.

But that’s not how Republicans see it [unemployment benefits]. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

Dancing DeLay agreed:

Crowley pointed out that saying “people are unemployed because they want to be” is a “hard sell.”

DeLay responded: “Well, it is the truth.”

Without trotting out all manner of charts and graphs [BR: Ok, one chart] to demonstrate how absurd this position is, I’ll make one comment and ask a few questions:

Comment:  This position — at its core — essentially labels Americans as lazy ne’er-do-wells who’d just as soon live off society’s largesse than earn a living. Is that really a position any politician would want to take?  Does anyone else find that as offensive as I do?  Anyone know someone who’s living on UI and lovin’ it?

Question for Senater Kyl and Dancing DeLay:  How would you explain the epidemic laziness that apparently afflicts Americans exactly at business cycle peaks, which is then somehow miraculously cured at business cycle troughs?

Interestingly, the JOLTS data was released just yesterday, and we see that there are still well over five unemployed for every job opening (near the recent record of over six, though there was an improvement in the number of job openings).  The un- and under- employment rates speak for themselves.  Comments like these should really be beneath any reasonable level of civil discourse.  It is pathetic that they’re not.

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10. Funemployment, n. The practice of enjoying one’s unemployment.

8. Staycation, n. Vacationing at home or near home because traveling further would be prohibitively expensive.

6. Madoff’d, v. To get ripped off in a particularly offensive fashion.

5. Recessionista, n. A consumer who has historically paid big bucks to look like a million bucks and who, unwilling to quit his/her fashion habit in the face of the recession. NOTE: I prefer the Kudlowian definition of the rare person forecasting a recession before the event in the face of good news ; (i.e, I was the lone Recessionista on Kudlow & Co. last night).

2. Permatemp, n. The condition of being permanently employed as a temporary worker.

1. Decruited, adj. To be fired from a position one has not even started yet.

I would add Recession Porn – an obsession with the darkest, ugliest charts, articles and anecdotes about the recession. As in, “I used to go to that blog all the time, but I got bored with all of the recession porn.”

Any other new words out there worth adding to the list?

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Source:
Recession slang: 10 new terms for a new economy
Tracey D. Samuelson, Taylor Barnes
Christian Science Monitor, March 8, 2010
http://www.csmonitor.com/Money/new-economy/2010/0308/Recession-slang-10-new-terms-for-a-new-economy

“As the accompanying charts show, three disparate indicators — covering unemployment, corporate financial distress and stock market volatility — have gone from very high to a little below historical averages . . .”

Here’s the mandatory chart:

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click for larger graphic

courtesy of NYT

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Source:
After Jerky Swings, the Economy Begins to Look Nice and Boring
FLOYD NORRIS
NYT, March 5, 2010
http://www.nytimes.com/2010/03/06/business/economy/06charts.html

I speculated that grievances, and the reduced assessments that I figured went along with them, were going to be yet another problem for already-strapped municipalities and that, given the state of the real estate market, this would play out nationwide.  Looks like perhaps I was wrong:

I live in a community of about 5,500 households and a smattering of commerical businesses.  Curious about what was going on with regard to grievances, I filed a Freedom of Information Act (FOIA) request.  This is what I got back (all calculations are mine):

In 2008, there were a total of 227 grievances filed (ed. note: both residential and commercial; unknown the number of each).  Of the 227 grievances filed, a total of 64 assessments (28%) were reduced by the Board of Assessment Review.

In 2009, there were a total of 551 grievances filed (+143% over ‘08).  Of the 551 total filed, 41 assessments (7.5%) were reduced by the Board of Assessment Review.

Here are my three takeaways:

1)  That even in 2009 only 10% of property owners grieved their assessments.  The other 90% are apparently idiots like me.

2) That in 2008 only 28% of those who grieved got relief and,

3) That in 2009 only 7.5% of those who grieved got relief.  What kind of sick joke is that?

I suspect it’s possible that municipalities have been digging in, denying grievances in the hope of hanging on to one of their main streams of revenue.  After all, how far is the typical homeowner willing to go to shave some bucks off his tax bill?  Probably not all the way to court, with its attendant attorneys fees and inconveniences.

Any interesting stories out there?

They have now retooled their Tracking the Recession page to Tracking the Economy, and the default graphs are indexed to 100 in July 2009 (the economy’s apparent trough).

The accompanying note states (emphasis mine):

The horizontal axis reports the months before and after the most recent business cycle turning point. In the recession chart of Figure 1, corresponds to December 2007 while in the expansion chart month zero corresponds to July 2009.

We’ll eventually see if the NBER agrees with their assessment.

There seems to be widespread consensus that the recession ended in mid-2009 (even perma-bear David Rosenberg has acknowledged as much in recent notes), and perhaps, on a technical basis, it did.  However, with employment and income gains virtually nonexistant, it’s certainly a tough sell to the American public.

The revision shows final sales in the US were weaker than originally reported last month. Business investments and exports were higher, but Inventories were bigger (meaning, the reduction of inventory backlog was also slower). Nearly two thirds of GDP growth for Q4were changes in inventories — not final sales.

Rex Nutting points out that even with the big Q4 GDP, U.S. GDP was down 2.4% in 2009 — the worst showing since 1946 (down 10.9%). Rex also notes “In 2009, business investment fell the most since 1942, while imports fell the most since 1946.”

via Barron’s Econoday