Current Statistics (10-03-2003)
The following side-by-side comparison of the current recovery to the last is interesting in that it is clear that this latest recession was really not as severe as the last. This is a clear example of the New Paradigm in Economics: an economy marked by stiff competition, increased productivity, marked by unemployment that is structural in nature and can only reduced by raising economic activity and creating new jobs.
GDP (2nd Quarter 2003 Real GDP: 3.3% - Revised from 3.1%)
The second quarter of 2003 showed continued positive growth in real GDP… The Commerce Dept reported a 3.3% growth rate for the 2nd Quarter 2003 (on an annualized basis), revised upward from last month’s estimate of 3.1% (which was revised upward from an initial estimate of 2.4% in July). It marked the 7th consecutive quarter of economic expansion, allaying fears of a double dip recession. At this rate, indicators argue that the 3rd Quarter of 2003 will confirm continued economic expansion. Interestingly, many analysts are forecasting a fall-off in GDP for the remainder of the year. Their rationale is based on their belief that the effect of tax cuts and resultant durable goods purchases have already been registered and will not play a role in third – fourth quarter GDP.
Like the unemployment comparison above, the GDP growth statistics clearly point out the fact that this most recent recession and recovery, 1st Quarter 2001 – 2nd Quarter 2002, are much less severe than in the recession/recovery in 3rd Quarter 1990 – 2nd Quarter1992. Note: the overall total average GDP for seven quarters 1990 – 1992 was 1.6%, while the GDP for 2001 – 2003 was 1.7%.
Jobless Claims (4-wk rolling avg: 411,000 Sep-13, to 407,000 Sep-20, 403,500 Sep-27)
The new Jobless Claims data came in at 399,000 for the week ending September 27, 2003. Department of Labor data indicate that the new jobless claims are trending slightly downward, however there have now been five consecutive weeks of claims above the 400,000 mark, generally viewed as the level required for economic expansion.
On a brighter note, in the Unemployment Insurance Weekly Claim Report, published by the Department of Labor, highlights the fact that first time jobless claims have gone from 428,000 for week ending Sep. 6, to 400,000 for week ending Sep. 13 to 381,000 for week ending Sep. 20. The four-week rolling average edged downward to 403,500 from the 407,000 reported the previous week.
The following graph provides yet another comparison of this latest recovery to the last one in the early 1990s. Note: initial jobless claims in this recovery period are considerably lower than before. Also, again in keeping with the New Paradigm in Economics, the jobless claims are back loaded this time around pointing to higher levels of structural unemployment.
Note: there were 173,000 more Initial Jobless Claims in the 3rd Quarter 1990 – 4th Quarter 1992 time frame; averaging 17,300 per quarter more than in the 1st Quarter 2001 – 2nd Quarter 2003 time frame.
Leading Indicators (6.0%+ annual rate September 18, 2003)
According to figures released by the Conference Board on September 18, “The leading index increased again in August, and is now up by 2.5percent from its low in March (more than a 6.0 percent annual rate). In addition, the strength in the leading index has been widespread over this period.”
New Housing Starts
The most recent data shows continued near record levels of new housing starts. While the August figures dropped 3.8% since July, it represents an 11.7% over August 2002 numbers. This amounts to an annualized rate of 1.8 million units seasonally adjusted. This sector continues to perform strongly through the current expansion.
New Residential Sales
According to the Census Bureau, sales of new homes grew at a 3.4% clip in August, representing 1.15 million units seasonally adjusted. Again, this rate exceeds the August 2002 figures by 12.2%.
The most recent report from the Commerce Department shows that New Orders for Manufactured durable goods dropped of 0.9% in August, the first such drop since April of this year. Shipments also dropped 2.9%.
New orders for Capital, or long-lasting durable goods grew at a 2.2% rate, while shipments dropped 3.5%. Within that data, defense related orders increased $2.6 billion, while non-defense actually fell by $1.2 billion.
While first impressions might lead one to have grave doubts concerning the argument for a continued recovery based on the latest lackluster numbers, it’s interesting to note that the July numbers were revised upward considerably from last month, skewing further the month over month change. Mark Vitner, Economist at Wachovia Securities, noted in an interview on CNBC that adjustments are common in this extremely volatile segment and the stand-alone news for August was actually very respectable.
Current Account Balance
The Current Account Balance consists of the Trade Balance (Net Exports (Exports less Imports) of Goods and Services), the Income Balance (Income Receipts and Income Payments), and net Unilateral Current Transfers.
Despite continued productivity and unit labor cost gains, the Current Account, buoyed by an overvalued Dollar, continues to worsen. So long as the major trading partners (Pacific Rim, Europe and North America) continue to intervene to undervalue their currencies, then Current Account deficit levels will hold or continue to deteriorate.
On a seasonally adjusted basis, the CPI rose 0.3 percent in August, according to the Bureau of Labor Statistics. The core rate (absent food and energy) rose at a 0.1 percent rate, down from the 0.2 percent rate in July. The unadjusted 12-month figure for inflation weighed in at a whopping 2.2 percent and at 1.3 percent excluding food and energy.
The following graph, again compares current CPI data to that from the previous recession/recovery (3rd Quarter 1990 – 4th Quarter 1992):
From another perspective: for the inflation experienced in the same number of time periods (30-months), the CPI for 3rd Quarter 1990 – 4th Quarter 1992 totaled 9.1%, while that for 1st Quarter 2001 – 2nd Quarter 2003 totaled 5.0%…
10-year U.S. Government Bond Rate
The 10-year Maturity U.S. Government Security continues to remain trading at a relatively low rate. At close of business, October 3, 2003 the yield stood at 4.20 percent. In the absence of inflation, and the quality of U.S. Government debt, there is no reason for it to rise to a higher rate in the near future.
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