Meanwhile, the economy is slow but not in a recession. It may feel like one, but the facts are that a recession has not started. What facts? The Coincident Economic Index of The Conference Board Leading Economic Indicators, the best measure of where we are, rose by 0.1 percent in December. Therefore, the economy wasn't in recession through the holidays. A $14 trillion economy doesn't move fast to slip into recession in a mere matter of weeks. So the economy is slow, perhaps slow enough to feel like a recession. But technically speaking, the facts show a recession has not started.
Tuesday, January 29
8:30am Advance Report on Durable Goods Manufacturers' Shipments and Orders (Bureau of the Census)
Orders, excluding transportation, fell in October and November. They probably made up some, but not all, of that loss in December. A slow ordering rate, however, is very likely to continue this winter. And that means not enough new orders will be coming in to relieve a recession in the manufacturing sector. Industrial production might continue to fall and certainly factory employment is likely to continue to contract.
10:00am Consumer Confidence (The Conference Board)
After remaining rock steady through the summer of 2007, consumer expectations began to wilt this autumn. Did that continue in the early weeks of the new year?
Wednesday, January 30
8:30am Gross Domestic Product (4Q — 2007) (Bureau of Economic Analysis)
After rising at an almost 5 percent annualized rate in the third quarter, the economy did not even grow by half that rate in the fourth quarter, and perhaps not even by 1.5 percent. That's a big shift in momentum and has contributed to the feeling that a recession has started. Moreover, the economy might not be growing faster than 1.5 percent in the current quarter. But 1.5 percent growth is not a decline in GDP, a necessary condition to call this a recession.
Thursday, January 31
8:30am Personal Income and Outlays (Bureau of Economic Analysis)
Look for personal income to have risen a little faster (0.3-to-0.4 percent) than spending (perhaps no more than 0.1 percent). This is an important relationship. Nervous consumers are increasing spending more slowly than income. So what would consumers do with a tax rebate in March, if they get one?
10:00am Help-Wanted Advertising Index (The Conference Board)
Labor market indicators have been reflecting a slow pace in hiring (below 100,000 jobs, and perhaps not even half that). Did any of this change in the latest survey period?
Friday, February 1
8:30am Employment Situation (Bureau of Labor Statistics)
After a very soft December, a 50,000-to-75,000 gain in payrolls may have developed in January. One note of caution is in annual benchmark revisions, which possibly will show less job growth in 2007 than was first estimated. The unemployment rate might even jump up to 5.1 percent. Finally, a very important point could be whether average hourly wages were still rising at about a 3.7 percent rate, or did that also slow? Fear of weaker job and income gains is exactly what has caused consumer expectations to wilt.
Vehicle Sales
Consumer buying remains cautious. The pace of vehicle sales in January probably was no better than in November or December — nor is it likely to pick up in March or April, even if tax rebates start arriving in the mail.
BY THE END OF THE WEEK
The data this week and in coming weeks will continue to reflect a slow pace of domestic economic activity. Rate cuts and stimulus packages help but are no silver bullet or magic pill. Therefore, rate cuts and stimulus notwithstanding, the economy is slow and bear financial markets are in place and will likely be for the rest of the first half of the year. Optimists think conditions could improve in the second half. Pessimists worry that improvement might take until the second half — the second half of 2009.
