By Laura Conaway

Consumer confidence fell in October, the Conference Board reports. The group's Consumer Confidence Index dropped from 53.4 in September to 47.7 this month. People expressed concern about both their current circumstances and the future. The Expectations Index declined more than the Present Situation one.

Unemployment fueled the public's worry, with 49.6 percent of Americans saying jobs are hard to get. That's the highest proportion since May 1983. Ian Shepherdson of High Frequency Economics writes that public's bleak assessment of the future spells trouble:

This is bad news because the outlook index is a near-term leading indicator of consumers' spending -- current conditions just moves in line with unemployment -- and at this level it is consistent with broadly flat real spending.

Shepherdson notes that the continued credit crunch might dampen spending even more than expected. This was the month the Dow Jones Industrial Average crossed the 10,000 mark again, and yet this rally hasn't had the usual effect. Shepherdson writes that "the lack of response this time around is worrying."

The market sank today a bit after the confidence numbers were released.

By Laura Conaway

Sales of existing homes hit a two-year high last month, as buyers scrambled to use the $8,000 federal tax break for rookie owners. Bloomberg reports:

Purchases jumped 9.4 percent to a 5.57 million annual rate, more than forecast and following a 5.09 rate in August, the National Association of Realtors said today in Washington. The median price fell at the slowest pace in a year.

The tax break runs out Nov. 30. Some members of Congress and the housing lobby have been pushing to extend the program and increase the amount to as much as $15,000. A Treasury Department audit this week show signs of fraud and abuse in the program. One reported buyer was four years old.

Falling hours help lead to falling earnings. Click to enlarge. (Bureau of Labor Statistics)

By Laura Conaway

It makes sense: People are working fewer hours -- between layoffs, furloughs and the shrinking of overtime -- and they're making less money. Today the Bureau of Labor Statistics charts the situation of smaller paychecks, with real average earnings declining by 0.4 percent from August to September. Urban and clerical workers managed earnings growth of 0.2 percent.

Weekly earnings peaked in December 2008 -- and they've fallen by 1.9 percent since then.

By Laura Conaway

The Dow Jones Industrial Average may have been heading toward 10,000, but you folks had the blues. From Bloomberg:

The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 69.4 from 73.5 in September, which was the highest in more than a year. Measures of expectations for six months ahead and current conditions both fell. The index averaged 87.3 in [the] 12 months leading to December 2007, when the recession began.

The glum outlook might have something to do with the continued rise in unemployment and foreclosures.

Up, and not by much. (Source: Bureau of Labor Statistics)

By Laura Conaway

With unemployment on the rise in September, average hourly wages grew by a single penny, to $18.67. The length of the average workweek fell back by 0.1 hours to its historic low of 33 hours, first reached in June.

Bloomberg News today hauls out the "D" word -- deflation, which Nobel laureate economist Joseph Stiglitz says is "definitely a threat right now." Technically, deflation is when prices are falling but you don't care because wages are falling faster. It's a nightmare spiral.

Today's hourly wage growth of a penny comes in a year that saw zero growth from March to April and a penny growth from May to June. We may be stuck with this kind of stagnation for a while. From Bloomberg:

With unemployment elevated, companies may not need to raise pay to attract workers, even when the economy picks up.

The Commerce Department today rounded out the gloomy with its report on manufacturers' shipments, inventories and orders. In August, new orders fell by 0.8 percent after rising for four straight months. Only when companies have left over work can they be expected to hire more workers.

After the jump, a chart of that shrinking average workweek.

Continue reading "Wages, Hours Stagnate As Stiglitz Warns Of Deflation" >

By Laura Conaway

Here's a twist on the recent trend of economic indicators shrinking less than expected: The Institute for Supply Management says manufacturing grew in September -- but the uptick is smaller than expected.

A reading of above 50 on the Purchasing Managers' Index, or PMI, shows expansion. Factories clocked in at 52.6, which means the sector was expanding. Analysts expected the index to come in at 54. In August, the figure was 52.9. As economist Brian Bethune told Bloomberg:

"We're still in positive territory but we're just not advancing at quite the same rate."

By Laura Conaway

New claims for unemployment insurance rose last week for the first time four weeks, climbing by 17,000 to 551,000, the Department of Labor reports. That's more than the 535,000 analysts expected.

If you're looking for work or know someone who is, take heart: the four-week moving average fell by 6,250, to 548,000. If you're waiting on your next benefits check, you're still in good company: As of Sept. 19, 6,090,000 people were waiting, too, about 70,000 fewer folks than the week before. The rolls of people on extended Emergency Unemployment Compensation rose to 3,275,213 as of Sept. 12, up from 3,175,381.

The key now is chronic unemployment, especially for people out of work longer than six months. Until they start finding work, unemployment is likely to keep right on climbing. We'll get the September figures Friday morning.

Meanwhile, consumers overall are spending more money -- or at least they spent more money in August. The Bureau of Economic Analysis says personal spending rose by $127.3 billion, compared to growth of $22.9 billion in July. Americans saved at a rate of 3 percent, compared to 4 percent in July. You can track that right to the government's Cash for Clunkers program, with spending on durable goods up by 5.9 percent.

The BEA says personal income rose by 0.2 percent, a touch over the expected 0.1 percent.

By Laura Conaway

This week we'll get a few new signals about where this economy is heading. One comes from the Institute for Supply Management in Chicago. Its Chicago Purchasing Managers' Index, or Chicago PMI, gives a snapshot of whether manufacturing in that region is growing or shrinking. The September answer is in:

Shrinking.

A reading of below 50 on the Chicago PMI indicates contraction, and above 50 indicates expansion. Analysts were looking for a 52. They got a reading of 46.1, down from 50 in August.

U.S. Treasurys got a little bounce after the news, because investors value safer bets in a stormy economy. When Treasurys go up, stocks tend to drop, as they did this morning.

The good news, such as it is, is the same old news lately, from GDP to job loss: The rate of contraction is slowing. The full ISM report is due out Thursday morning at 10 a.m. Eastern.

By Laura Conaway

Part of companies' work in recovering from a recession is getting their businesses to be the right size for the limping market. They have to stop falling before they can start climbing.

We're seeing more signs of that today from the U.S. Census Bureau, which says that wholesale inventories fell by 1.4 percent from July to June -- meaning merchants stockpiled less stuff -- and 12.8 percent from the year before. On the flip side, sales rose by 0.5 percent from June. Sales were down 12.8 percent from a year ago.

By Laura Conaway

Median household incomes fell by in 2008 by 3.6 percent, to $50,303, the U.S. Census Bureau reports. The poverty rate hit an 11-year high at 13.2 percent, up 0.7 percent. Some 39.8 million people were classed among the poor last year, up by 2.6 million. The ranks of Americans without health insurance grew to 46.3 million, from 45.7 million -- a small enough increase to leave the percentage unchanged at 15.4 percent.

Unpack the rest of the numbers in the Census Bureau's annual report on income, poverty and health insurance, including the news that 31 percent of the population fell into poverty for at least two months at some point between 2004 and 2007.

By Laura Conaway

The Federal Reserve is ready to put the skip back in your step, America. Its latest survey of the 12 Federal Reserve Districts, known as the Beige Book, concludes that the economy is either stabilizing or getting better in most of the country.

All but one district, St. Louis, said the economy was at least stable. In St. Louis, central bankers report the pace of decline is "moderating." Businesses across the nation are "cautiously positive," the Fed says.

Again, we're seeing stronger signals of optimism from businesses than from individuals. AP notes that analysts think the economy is now growing at an annualized rate of three or four percent. From AP:

Most of that growth should come from more spending from businesses, which had slashed investments -- often by double-digits -- during the recession.

Consumer spending, however, is expected to turn up only because of the binge-buying of automobiles generated by the short-lived Cash-for-Clunkers program.

Consumer spending is still down, as is commercial real estate and lending.

By Laura Conaway

That giant snapping sound must have been your wallets closing. Americans slashed their borrowing in July by the largest amount on record, according to new numbers from the Federal Reserve. People pulled back on debt at a yearly pace of 10.4 percent, and that's after a 7.4 percent annualized drop in June.

All told, Americans borrowed $21.6 billion less in July than they had in June, the biggest one-month drop since records began in 1943. Not even Cash for Clunkers could stop the rapid draining of credit. From AP:

Demand for non-revolving credit used to finance cars, vacations, education and other things fell by $15.4 billion, also a record decline. That 11.7 percent pace was on top of an 8 percent annualized decline in June.

This economic crisis has been described as a crisis caused by too much leveraging (or borrowing) followed a painfully rapid deleveraging (in which debtors either pay off what they owe or creditors give up collecting). It's also a crisis of overconsumption followed by a painfully steep decline in consumer demand. In today's numbers from the Fed, those twin factors meet.

Total consumer credit now stands at $2.47 trillion.

The OECD says consumer confidence is still low. The dark blue line is the U.S. (Click to enlarge.) (OECD)

By Laura Conaway

The economy may get better faster than expected, the Organisation for Economic Cooperation and Development says in a new report.

The OECD now predicts that economic growth will fall by 3.7 percent this year across the wealthy, industrialized nations of the G7. It's still not great news, but it's better than 4.1 percent drop projected in June 2009.

The OECD notes that the credit markets have calmed down, though bank lending continues to decline. The housing markets have also begun to stabilize, the report says, global trade has reached a bottom and export orders on the rise.

Among the charts is the pair you see here, tracking the difference between consumer confidence (above) and business confidence (after the jump). The data come from different pools, so you can't make a one-to-one correlation. Still, I'm interested in the steady rise on the business side -- and in what looks like relative optimism.

Continue reading "OECD Says Economy's On The Mend. Who's Feeling Confident?" >

By Laura Conaway

Calls for factories to make goods went up in July, the U.S. Census Bureau and the Commerce Department report, but by less than analysts expected.

A fall in demand for petroleum products and other "nondurable goods" like food dragged the number down. Demand for transportation goods jumped by 18.5 percent -- enough to push factory orders overall up by 1.3 percent. In a Thomson Reuters survey, analysts predicted growth of 2.2 percent.

The reports shows that people are still cutting back on their spending. The 1.9 percent drop in demand for nondurable goods is the most since December.

By Laura Conaway

Productivity grew at an annualized rate of 6.6 percent in the second quarter, the Bureau of Labor Statistics reports. That's the largest increase since the third quarter of 2003.

It's good news for workers, in the sense that people with jobs are finding themselves more fully occupied. Only when companies can profit from doing more work will they hire new people to do it. When productivity rises, it suggests that employers are coming closer to having the right size of workforce -- a better base from which to grow.

Today's numbers show that actual output is falling, but that hours worked are falling faster. Compared to this time last year, output was down 5.5 percent and hours worked 7.2 percent. Labor costs -- the ratio of hourly wages to productivity -- fell at an annual clip of 5.9 percent. That's the biggest drop since the second quarter of 2000.

Update: After the jump, what "productivity" means.

Continue reading "Productivity Makes Biggest Leap Since 2003. (Yes, You're Working Harder.)" >

By Laura Conaway

Two new signs of life in the economy:

First, U.S. manufacturing grew in August for the first time in 19 months. Customers were ordering new stuff like it was 2004, the Institute for Supply Management reports. Exports grew by five index points, thanks to a weaker dollar making it cheaper for other nations to buy American goods. High Frequency Economics' Ian Shepherdson says the Cash for Clunkers program helped.

Overall, it was the best showing since June 2007, with an ISM manufacturing index of 52.9, up from 48.9 in July. Anything over 50 indicates growth.

You remember growth, right? Norbert Ore, chair of ISM's survey, tells the AP that the current index figure has historically equated to a 3.7 percent annualized rate of expansion in gross domestic product. Last quarter, GDP was contracting at a yearly clip of 1 percent.

Second, the National Association of Realtors reports that its pending home sales index in July hit a two-year high, rising 3.2 percent. That's the sixth increase in a row and 12 percent up from this time last year. Pending sales have climbed for so long since the index began in 2001. Calculated Risk chalks it up to falling prices and a tax credit for first-time buyers.

You could take all of this for good news, unless you're in the double-dip recession crowd.

UPDATE: The Commerce Department says construction spending fell by 0.2 percent from June to July. Spending through the first seven months of the year is off by 11.4 percent.

Enlarge: A little less last month, but still way up from 2008. (Calculated Risk)

By Laura Conaway

Inflation remains a nonfactor, the Bureau of Economic Analysis says today in the Personal Income and Outlay report for July. The BEA's price index increased less than 0.1 percent, compared to 0.5 percent in June.

If you take out the volatile prices of food and energy, you're still looking at an increase of 0.1 percent, compared to 0.2 percent in June. Economists consider inflation of 2 or 3 percent healthy.

Inflation is especially important to watch now that the recession appears to be bottoming out. As long as it stays out of the picture, the Federal Reserve says it will keep interest rates at record lows in an effort to stimulate the economy.

Continue reading "Inflation, Income Flat In July, While 'Clunkers' Sparks Spending" >

Another victim of the struggling economy. (Beerzie Boy)

By Chana Joffe-Walt

A couple months back we got an letter from listener Beerzie Boy, who said everyone in his office had started using coins instead of bills in the office vending machines. Turns out it was an illustration of something called the denomination effect. Priya Raghubir explained people are much more likely to spend smaller denominations than larger bills.

Now, Beerzie Boy checks back in with an update -- it looks like people aren't just laying off spending coins, they're are laying off snacking in general. This note was recently posted on the machines:

"Due to very low volume sales at this location we regrettably need to remove the vendors from this site. The poor sales too frequently lead to outdating of product. The equipment will be picked up in approximately one week. We are sorry for any inconvenience."

Continue reading "Indicator: Goodbye Vending Machines" >

By Mathew Katz

It's the beginning of the month, and you all know what that means: it's time for a whole slew of new economic indicators!

Construction spending in the U.S. rose by 0.3 percent in June, beating out expectations that it would fall by 0.5 percent, according to the Commerce Department. Spending for public buildings has hit a record high -- it went up 1 percent to $321.75 billion. June was the third month in a row when public construction spending climbed. At the same time, the report says that private residential construction -- building houses -- rose 0.5 percent to $246.07 billion.

Manufacturing activity grew more than expected in July. The Institute for Supply Management's national manufacturing index jumped to 48.9, from 44.8 in June. Economists only expected the index to hit 46.5 last month. The index measures overall economic activity in the manufacturing sector. Still, the ISM's report notes that the index is still in contraction levels -- readings above 50 indicate growth, but levels below 50 means manufacturing is still contracting.

Finally, with the good-ish news about manufacturing, crude oil prices rose above $71 a barrel for the first time in a month, and commodity markets are expected to rise as well. Of course, higher oil prices translate into higher prices at the pump, too. Gasoline for delivery in September is up 6 cents a gallon or three percent.

By Mathew Katz

Remember the good old days? When the GDP was going up and most of your friends had a job? Remember relaxing in your relatively prosperity, turning on the TV, and watching fun commercials for all the products you could afford?

Advertisers hope you do.

There's a great article at The Globe and Mail today on advertisers bringing back old commercials in a recession. The goal is to invoke nostalgia for better times through classic ads for comforting, familiar products like ketchup, burgers, and Coke.

By turning to archival footage, companies also hope to remind consumers that their brands have staying power through rough times -- because ketchup is forever.

Does it work? Have you seen any old commercials that made you feel safer, more reassured -- or at least convinced you to go out and buy that product? Any old commercials that you'd love to see on TV again? Let us know in the comments, or on our Twitter feed.

Click for a larger version Huffington Post

 

If this recession truly is unparalleled, it means that we likely need new metrics to understand it. The Huffington Post went about making one, combining indicators to create a new "Real Misery Index."

The original misery index is an economic indicator, created by economist Arthur Ocun and often invoked by Jimmy Carter. It's calculated by adding two nasty economic numbers -- the inflation rate and the unemployment rate.

Continue reading "HuffPo's New Level Of Misery" >

Two pieces on a recession indicator that there's just no escaping:

First, in the category of glass half-full, "Home Burials Offer an Intimate Alternative." Grieving families tell the New York Times it's more intimate to lay someone to rest in the backyard, and cheaper. "I think with our economy being the way that it currently is, and it's getting worse, that many people who may not have chosen to do these types of things may be forced to because of the finances," said Verlene McLemore, of Detroit, who held a home funeral for her son, Dean, in 2007.

And in the category of glass half-empty, "More bodies go unclaimed as families can't afford funeral costs." The Los Angeles County coroner's office handles murder victims and suspicious deaths, and it's reporting that 36 percent more cremations were done at taxpayers' expense. At the county morgue, which handles cremation of indigents, the spike is 25 percent. "The families just tell us flat-out they don't have the money to do a funeral," Lt. David Smith, a coroner's investigator, tells the LA Times.

(Thanks, @reneerico, for the LA link.)