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Something Is Still Happening

Econophile's picture


This article originally appeared in The Daily Capitalist.

You have to consider the impact of continually falling home prices on the national psyche. Now, as a follower of the Marginal Revolution, I know well there is no "national psyche," but in the sense that people are affected by what they see and hear everyday, there is this background drumbeat of bad news from the housing market. And I think that has led to the pessimism the surveys reveal.

For example, DiscoverCard research released the following survey:

Three months of rising confidence among small business owners stalled in December, as fewer see economy getting better and more see it getting worse, according to the Discover Small Business Watch. The monthly index dropped to 81.6 in December, down 5.6 points from November. The index remains 4.6 points higher than one year ago.

Twenty-five percent of small business owners said the economy is getting better this month, down from 33 percent in November; 51 percent said it is getting worse, up from 46 percent; and 22 percent said the economy is staying the same, up from 17 percent the prior month.

Another survey said:

Small, privately held businesses—companies with fewer than 500 employees—added a net 91,000 jobs last month, according to the ADP data released Wednesday. Though that was a sizeable jump over October's net gain of 78,000 jobs, the average net monthly gain so far in 2010 has been just 35,000 jobs.

By contrast, small businesses in 2006 and 2007 added a monthly net average of 143,000 and 79,000 jobs, respectively, ADP's data show.


A number of factors—including pending tax legislation, the ongoing credit crunch, and changes that owners made during the recession to stay afloat—are contributing to entrepreneurs' restrained approach to hiring.

"Like a lot of investors, they're sitting on the sidelines," says Raymond Keating, chief economist for the Small Business & Entrepreneurship Council, a nonprofit advocacy group in Oakton, Va.


Small businesses play a major role in the U.S. economy, employing half of all private-sector workers, according to the U.S. Small Business Administration. They have also historically started adding jobs more quickly after recessions than large companies. For example, small businesses added a net monthly average of 38,000 jobs in 2003, while large businesses shed a net 22,000 jobs on average per month that year, ADP's data show.

I still believe that "something is happening" and the data continues to improve although not in a straight line. Which is normal.

For example, initial jobless claims continue to drop:

Initial claims for unemployment benefits fell last week to the lowest level in more than two years, offering another hopeful sign that the job market is improving as the economy regains some momentum.


New claims fell 34,000 to a seasonally adjusted 388,000, the lowest since July 2008, the Labor Department said Thursday. The four-week moving average for claims, a measure used to smooth volatility in the weekly data, fell to 414,000 from 426,500. New filings have been hovering below 450,000 a week since the beginning of November.

This is positive news, but job losses still outnumber job creation, where I think we will be stuck for quite a while.

Want more? The ISM Manufacturing Index for December was up again, slightly, at 57 versus last month's 56.6:

[T]he ISM's composite index rose four tenths to 57.0, well over 50 to indicate significant monthly growth during December. New orders have moved above 60 for the first time since May, at 60.9 for a 4.3 point jump that hints at a pivot higher for the sector. Tracking new orders is production, up nearly six points to 60.7. Employment slowed slightly but the 55.7 level still indicates a significant monthly gain. ... The inventories index stood at 51.8, versus 56.7 the prior month. ... At the same time, though, inflationary pressures intensified, with the prices index hitting 72.5, from 69.5.

The Chicago PMI really broke out in December:

Purchasers in the Chicago area are reporting red hot conditions in December. Their business barometer index jumped more than six points to 68.6. Details show major acceleration in new orders, to a 73.6 level which isn't likely to be exceeded in future reports, at least exceeded by much. In other words, incoming business is as good as it gets in the Chicago area.


Production, at 74.0, is keeping up with new orders while employment, at 60.2 for a nearly four point gain, is expanding sharply. Inventories are building, deliveries are slowing and input prices are rising -- all indications of strength.


A pivotal sign of strength is a big build for backlog orders which also increased in the Philadelphia and Richmond Fed reports. Rising backlogs point to the need to increase output, increase capacity and hopefully increase employment.

This update (Tuesday) from the Census Department showed new orders for manufacturing goods were up:

New orders for manufactured goods in November, up four of the last five months, increased $3.2 billion or 0.7 percent to $423.8 billion, the U.S. Census Bureau reported today.  This followed a 0.7 percent October decrease.


Excluding transportation, new orders increased 2.4 percent.  Shipments, up three consecutive months, increased $3.4 billion or 0.8 percent to $424.5 billion.  This followed a 0.4 percent October increase.  Unfilled orders, up ten of the last eleven months, increased $4.8 billion or 0.6 percent to $826.9 billion.  This followed a 0.7 percent October increase.  The unfilled orders-to-shipments ratio was unchanged at 5.75.  Inventories, also up ten of the last eleven months, increased $4.1 billion or 0.8 percent to $543.8 billion.  This followed a 1.1 percent October increase.  The inventories-to-shipments ratio was unchanged at 1.28.

The Census Department's State and Local Tax Revenue report showed further gains, matching the data from the Rockefeller Institute which I reported on in my article Why Quantitative Easing And Fiscal Stimulus Are Unnecessary.

State and local governments are still way in the red, but revenues are improving nevertheless. Whether California will go B/K is another topic.

This data on personal income just came in from the BEA:

Personal income (PI) increased $42.3 billion, or 0.3 percent, and disposable personal income (DPI) increased $37.8 billion, or 0.3 percent, in November, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $43.3 billion, or 0.4 percent. In October, PI increased $49.5 billion, or 0.4 percent, DPI increased $39.3 billion, or 0.3 percent, and PCE increased $68.9 billion, or 0.7 percent, based on revised estimates. Real DPI increased 0.2 percent in November, the same increase as in October. Real PCE increased 0.3 percent in November, compared with an increase of 0.5 percent in October.

From this perspective, things are looking better:

FRED data

These numbers from the BEA are quite mixed as this following table shows and do not exactly signal a turnaround as everyone hopes for, but things continue to move sluggishly positive:

For example, here are the "mixed results" part of the report:

Private wage and salary disbursements increased $6.6 billion in November, compared with an increase of $31.2 billion in October.  Goods-producing industries' payrolls decreased $3.0 billion, in contrast to an increase of $3.8 billion; manufacturing payrolls decreased $1.9 billion, in contrast to an increase of $2.6 billion.  Services-producing industries' payrolls increased $9.6 billion, compared with an increase of $27.4 billion.  Government wage and salary disbursements increased $0.8 billion, compared with an increase of $3.2 billion.

As I mentioned in my report on Christmas sales, personal savings are down. But ...

The Fed's Flow of Funds Report that came out December 9 showed that household net worth has improved substantially, mainly from debt reduction.

Household debt contracted at an annual rate of 1¾ percent in the third quarter, the tenth consecutive quarterly decline.  Home mortgage debt fell at an annual rate of 2½ percent in the third quarter, about the same as in the previous quarter.  Consumer credit was down 1½ percent, after a decline of 3¼ in the previous quarter. ...


Household net worth—the difference between the value of assets and liabilities—was an estimated $54.9 trillion at the end of the third quarter, up about $1.2 trillion from the end of the previous quarter.

This means that households are doing the right thing: reducing debt and increasing savings. But perhaps that isn't enough to cheer people up since in their minds their net worth is down $10 trillion since the peak in 2007.

Yes, I am quite aware of all the negatives out there, so I will repeat what I said before:

In my article “Something Is Happening” I noted a glimmer of positive economic data. I was cautious to not call it a “recovery” yet because there isn’t a clear trend. In addition there is some uncertainty about policies of the Fed and the federal government that may well thwart the recovery. But I can’t ignore positive signs. I read the same data as other free market oriented blogs out there, I am just about the only one seeing this. As I reported in “Something Is Happening,” economies repair themselves, absent government intervention in the process.


I believe because of the massive debt buildup during the crack-up boom, that the bust will be much longer than the average recession. At some point, though, banks start to clear out bad debt, especially CRE, residential foreclosures increase until the market absorbs overbuilt housing, and consumers cut back spending, pay down debt, and boost their savings. All these things are occurring now, especially, the CRE problems of banks which is the main problem of local and regional lenders who provide much of the credit to middle and small American businesses.


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Tue, 01/04/2011 - 17:30 | 847511 cramers_tears
cramers_tears's picture

The same gist can be found here at a construction industry article.  Green Shoots... Green Shoots...  "Housing Starts Seen Rising to Three-Year High" - The title seems to be a self-fulfilling one.  It's the use of the "Seen", as in "I seen that UFO, yep, I shore did!"  "Yep, I seen those housin' starts a boomin'!" (

I'm so jaded now that when I read stuff like this "Something is still happening," post or the "Three Year High Housing Starts" story, I just think WHAT A CROCK OF SHEYAT!

The only thing I do know is the success I've had since '08 has been when I figured out how TPTB were going to cheat.  Being on the short side as the Dow went to 6500 and long since.  I haven't made a leveraged deal since 2007.  I've deleveraged totally at this point.  I've generally moved my equities out of the US and the only thing that makes sense to me now is PM, Commodities and Real Assets.  I don't like the FX like Tyler and you ZHers.  The HFT has just killed my stock joy, so it's back to the small-biz thing for me.

Fraud is so pervasive that I believe nothing coming out of TPTB or their salesmen. When I read the fluff stuff they keep sending me from (New Regulations/Fair Trading Imperatives Draw Investors Back In... w/ a facing ad for "...get your own Dark Pool") or watch CNBC, CNN, Fox, MSNBC - I find it hysterical.  I was watching Morning Joe the other day and they're talking about THE RECOVERY - and I just couldn't stop laughing.  My girlfriend thinks I'm nuts.  I'd rather watch the two bears talk about the Bernank and the Jp Morgue than watch MSM these days... the two bears are at least entertaining.  I'm not kidding, I can't watch MSM for more than 5 minutes without feeling ill.

I did see one headline the other day that piqued my curiosity, "Looking for a job with an American company? Better learn Chinese or Spanish." ( '1.4M jobs created overseas' I've been taking a Chinese Class since Sep-10 - and all I know is this.  Speaking Chinese makes my mouth, tongue and throat hurt. Leichter zu verbinden sie als sie bekämpfen.

Now if I could just figure out whose best between the Western Bilderberger Moneychangers, The Chinese CFR/CMC Communists or the Russian Tri-Lateral Mobsters (I keep having to change my credit cards because of funny charges from Brighton Beach)?  If you've got the answer to that one  - why you're on your way home!  The US?-It just doesn't feel like home to me anymore.





Tue, 01/04/2011 - 16:42 | 847427 pat53
pat53's picture

Just more evidence that the economy is improving, in spite of what the bears think or "hope" for. SPX will get easily to 1400 by year end.

Tue, 01/04/2011 - 16:53 | 847440 Dr. Acula
Dr. Acula's picture

>SPX will get easily to 1400 by year end.

Once interest rates rise, the government will decide to turn the printing presses on at full blast to help manage its debt.

SPX at 14,000 is more realistic.

Tue, 01/04/2011 - 16:37 | 847409 Dr. Acula
Dr. Acula's picture

"Something is Still Happening"


Reminds me of the onion article: "Something About Tax Cuts Or Earnings Or Money Or Something In Recent Economic News",18169/


Tue, 01/04/2011 - 16:13 | 847360 mtomato2
mtomato2's picture

These are the kind of analyses I just can't stand.  Graphs!  Charts!  Statistics!  Lies!  Damned Lies!  The simple responses noted here in the thread are bulletproof and, well, simple.


"...Let's see, the federal government runs a 12% deficit three years in a row to prop up banks and state payrolls, yeah, I suppose that counts as "something". Sustainable? Uh, no..."

"...If by 'something,' you mean a complete fraud being made of markets and the bulk of formerly middle class citizens of nations everywhere by Ponzi scheme-peddling and wealth-stealing central bank madmen, plundering the wealth of nations for the benefit of the global, nepotistic and incestuous overlord class, I agree.

Central planning is the new free market. Adam Smith is dead. Keynes is the new god. Pigs with friends in high places are engorged..."




The Experts and The Over-educated are going to get their asses handed to them by simpletons like me who only need to be able to add two and two.


Tue, 01/04/2011 - 15:58 | 847323 Sudden Debt
Sudden Debt's picture

You have to consider the impact of continually falling home prices on the national psyche. Now, as a follower of the Marginal Revolution, I know well there is no "national psyche," but in the sense that people are affected by what they see and hear everyday, there is this background drumbeat of bad news from the housing market. And I think that has led to the pessimism the surveys reveal.


Tue, 01/04/2011 - 16:01 | 847322 Rogerwilco
Rogerwilco's picture

Let's see, the federal government runs a 12% deficit three years in a row to prop up banks and state payrolls, yeah, I suppose that counts as "something". Sustainable? Uh, no.

Tue, 01/04/2011 - 15:50 | 847301 Shell Game
Shell Game's picture

I'm long some gold and uranium juniors, but mostly buying personally held bullion. Other than that the herd can do WTF ever it wants with WTF fake data, it matters not.

It's a Red Ryder market: "Don't short your eye out kid!"

Tue, 01/04/2011 - 15:48 | 847299 TexDenim
TexDenim's picture

What's most interesting to me is how much like a tidal wave the QE2 effect has been relative to these lackluster numbers. I guess I'm happy for the economy, if it turns out the medicine works, but it sure is a bitch trying to make sense of equity indicators that are no longer worth shit because the Fed effect overwhelms the market, at least on the short term.

Tue, 01/04/2011 - 15:38 | 847257 jus_lite_reading
jus_lite_reading's picture

The question remains, if "something will continue happening" without massive stimulus from the gov't. The answer is an astounding NO.

I don't have the time to go through your generalized reporting, but you make several grave mistakes by using data such as "household net worth" and simplifing it by pointing out it has increased $1.2 T. Dig a little deeper. It's not the amount that matters- it's who owns it.

Tue, 01/04/2011 - 16:28 | 847395 low_frequency_trader
low_frequency_trader's picture

+1 Exactly. No way is the massive transfer of wealth from those getting pink slips/foreclosure notices to those getting TBTF banker bonuses, and of debt from the TBTFs to taxpayers, going to morph miraculously into a sustainable recovery.

Tue, 01/04/2011 - 15:35 | 847250 bkrolik
bkrolik's picture


 In my humble opinion, it would be extremely useful, if you try to incorporate in your research the similar discussion from The buring platform blog.

It looks like you both take the same or complimentary sets of data, but come to quite different conclusion.



Wed, 01/05/2011 - 15:36 | 850059 Econophile
Econophile's picture

I try to believe what my eyes see, not what I want them to be. Also, I don't republish everything on ZH, and I have written further on this topic on my blog. And, I don't read the burning platform blog. Sorry. Thanks for the comment.

Tue, 01/04/2011 - 15:36 | 847245 andybev01
andybev01's picture

As cynical as I sometimes tend to get, it is refreshing to see a post that is balanced.


Or my meds have worn off and the sun is out today, so...

Tue, 01/04/2011 - 15:32 | 847234 Thanatos
Thanatos's picture

Yeah the fake statistics show things getting better.

When I see Dancing with the stars replaced with "Enumerating your constitutional Rights", I will believe that things have changed.

Until then.... Fuck Off.

Tue, 01/04/2011 - 16:53 | 847452 LFMayor
LFMayor's picture


He spun, his laugh and motion both like water spilled down silk, cape furling behind him in the duel and then crushed the head of his opponent with a busted off piece of porch rail from the premier whorehouse of Reddick, Indiana.

That sir, was some beautiful art in your reply.  Somewhere, your 6th grade creative writing teacher is smiling.

Wed, 01/05/2011 - 06:23 | 848683 Thanatos
Thanatos's picture

Sorry for the tantrum.

I should resolve to not contribute if I can't rise above a 6th grade response. Hehe.

Presentation of the Fuck Off falicy is weakness on display, I admit. But what is a fella to do when confronted with pile upon pile of steaming bull crap?

Eventually you get numb, put on the helm of ignorance, fire up the fuck-off dozer, put 'er in low and plow on through.

I think we are all getting closer to that f-o point and it will be the best worst day ever when we all take that leap into consequence.



Tue, 01/04/2011 - 15:22 | 847195 BearishFeijoadaSushi
BearishFeijoadaSushi's picture

This guy is being positive (as oposed to normative) which is something unusual at ZH and I appreciate that.

Tue, 01/04/2011 - 15:25 | 847208 TruthInSunshine
TruthInSunshine's picture

'Being positive' versus reporting what is reality...

Tue, 01/04/2011 - 16:12 | 847361 tmosley
tmosley's picture

This is the best bullish argument that it is possible to make with real/semi-real numbers.  Throw in the fact that a huge number of these jobs that have been created that are staunching the flow of new unemployed are funded by the government, and as such are non-productive misallocations of capital, and as such are consuming much of what little real capital we have left, and you see that this "boom", is only making the coming coming super-bust even larger.

Tue, 01/04/2011 - 16:41 | 847420 kaiserhoff
kaiserhoff's picture

Yes.  Capital allocation is well and truly screwed to the wall.  Also, small business will not hire until Obummercare is dead.  That whole clusterfuck scares the crap out of main street, and rightly so.

Tue, 01/04/2011 - 15:20 | 847183 TruthInSunshine
TruthInSunshine's picture

If by 'something,' you mean a complete fraud being made of markets and the bulk of formerly middle class citizens of nations everywhere by Ponzi scheme-peddling and wealth-stealing central bank madmen, plundering the wealth of nations for the benefit of the global, nepotistic and incestuous overlord class, I agree.

Central planning is the new free market. Adam Smith is dead. Keynes is the new god. Pigs with friends in high places are engorged.

Do NOT follow this link or you will be banned from the site!