Fed Chairman Ben Bernanke is one of the best contrarian indicators one could possibly find. Yesterday, Bernanke told the House Financial Services Committee that the U.S. economy is in a “nascent” recovery.
Given his historical track record of complete failure on matters like housing, the recession, and jobs, his yapping about the “nascent” recovery suggests the very best we can expect is for the recovery to stall, and more likely enter a double dip recession if not completely collapse.
Unexpectedly Bad News
Let’s recap some recent “unexpected” bad news.
Durable Goods “Unexpectedly” Drops
Please consider Equipment Demand Slows to Start 2010
Orders for durable goods excluding transportation unexpectedly fell 0.6 percent, the most since August, while a measure of bookings for business equipment showed its biggest decrease in nine months, the Commerce Department in Washington said. The Labor Department said new claims for unemployment insurance rose to a three-month high.
Factories may be taking a pause to gauge demand after boosting production in the second half of 2009 to replenish inventories. Reports earlier this week showed weaker consumer sentiment and home sales, underscoring Federal Reserve Chairman Ben S. Bernanke’s view that the recovery is “nascent” and still requires interest rates near zero.
“There’s no reason to think this is the start of a double-dip — some back and fill is standard operating procedure in recoveries,” Chris Low, chief economist at FTN Financial in New York, said in an e-mail to clients. “Rising jobless claims, weaker orders and falling consumer confidence suggest the economy is retrenching in the first half of the first quarter.”
Happy Talk On Durable Goods
Just take a look at that happy talk. There is every reason to think this may be the start of a double-dip recession. All we have seen is inventory replenishment, government spending, and various stimulus measures like cash-for-clunkers and housing tax credits that have withered on the vine.
Durable Goods Details
- Orders for non-defense capital goods excluding aircraft, a proxy for future business spending, fell 2.9 percent last month, the biggest drop since April 2009.
- Orders for machinery slumped 9.7 percent in January, the most in a year.
- Orders for motor vehicles and parts dropped 2.2 percent in January after a 5.5 percent gain.
- The big bright spot was Boeing received orders for 59 aircraft two months ago, an increase that wasn’t captured in the December data.
Less Than It Seems
Michael Panzer writing on the Big Picture Blog says Durable Goods: Less Than It Seems
During the last 17 years or so, the median value of the ratio of defense-related orders to the overall orders number has been 4.4 percent. However, since the recession began (in December 2007), the average has been 6.6 percent. Last month, it hit 8 percent. As with other areas of the economy where the government appears to be playing an important role, it’s worth bearing in mind that the “recovery” may not be all that it seems.
Blaming It All On The Weather
When all else fails, economists blame it all on the weather. Today, Weekly Unemployment Claims Spike To 496,000. I asked Will Reality Soon Set In?
I should have known better. Oh, silly me. It’s just the weather.
Inquiring minds are reading Jobless claims rise due to weather-related factors.
New claims for unemployment benefits jumped unexpectedly in the U.S. last week, mostly because state agencies processed a backlog of claims caused by snowstorms the previous week.
The severe weather also increased temporary layoffs in the weather-sensitive construction and transportation industries.
Many analysts expect this month’s snowstorms cost up to 100,000 jobs and will artificially inflate the unemployment rate. A clear reading of the job picture may not be available until March or April.
Also Thursday, Federal Reserve Chairman Ben Bernanke told a congressional committee that the snowstorms are likely to have a short-term — but not permanent — effect on unemployment and layoffs. He said policymakers will “have to be careful about not overinterpreting” the upcoming data.
Weather Related Questions
I have a few simple questions for all the dim-bulb economists now blaming the weather:
- “Did you not know there was a snowstorm on the East coast?”
- “If you did, then why didn’t you factor it in to your estimates?”
- “How can you be surprised by something you knew?”
I was pondering the mid-afternoon market spike and here we go again. Bernanke himself is blaming the weather.
Consumer Confidence Unexpectedly Plunges
Bear in mind that economists were shocked about the sudden drop in consumer confidence numbers. Please see Consumer Confidence Plunges To 46, Lowest Since April; Current Conditions Lowest Since 1983 for details on the consumer confidence numbers.
New Home Sales Unexpectedly Plunge
Please remember that on Wednesday New Home Sales Unexpectedly Plunged to Record Low.
Sales of new homes in the U.S. unexpectedly fell in January to the lowest level on record, a sign that an extension of a government tax credit may not be enough to rekindle demand.
Purchases declined 11 percent to an annual pace of 309,000, below the lowest forecast in a Bloomberg News survey of economists, from a 348,000 pace, figures from the Commerce Department showed today in Washington. The median sales price dropped 2.4 percent from January 2009 and the supply of unsold homes increased.
It’s All Weather Related Now
It’s kind of hard to blame new home sales on the weather but, hey, I suppose “It’s All Weather Related Now”.
And with that, the bad news buyers are out in force, secure in the knowledge that on account of a snowstorm on the East coast, “A clear reading of the job picture may not be available until March or April.”
After all, no one really wants a clear reading anyway.
The only real concern is how to make fairy tale economic projections. With that in mind, please note the upcoming temporary effects of the hiring of a million part-time census workers will more than smooth away the afore-mentioned ill effects of a snowstorm months earlier.
No doubt, economists will be chirping away that the boom in part-time hiring will soon mean full-time hiring. It won’t.
A “nascent” economic collapse is at hand, but how can economists possibly see it with all these weather related issues? When the collapse does come, economists will be saying once again “No one could possibly have seen this coming.”
Indeed. Economists have proven “It’s tough to predict the weather, even in arrears with 20-20 hindsight straight out of any newspaper in the country.”
Mike “Mish” Shedlock
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