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Economic Indicators to Watch What Are the Odds of a 2012 Recession? New York, NY Friday, July 20, 2012

Economic Indicators to Watch What Are the Odds of a 2012 Recession? New York, NY Friday, July 20, 2012

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  • 1. Economic Indicators to WatchWhat Are the Odds of a 2012 Recession? New York, NY Friday, July 20, 2012 Richard Yamarone Bloomberg Economic BRIEF Author of “The Trader’s Guide to Key Economic Indicators”Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737 Twitter: @Yamarone
  • 2. Economy Isn’t Advancing Fast Enough to Engender Job Creation Nonfarm Payrolls vs. Real GDP Payrolls (000) GDP YOY% 1200 6 5 800 4 400 3 2 0 1 -400 0 -800 -1 -2 -1200 -3 -1600 -4 NFP (lhs) GDP (rhs) -5 -2000 -6 -2400 -7 85 87 89 91 93 95 97 99 01 03 05 07 09 11 Source: BEA, BLS, Bloomberg Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 3. Economy Operating Well Below its Potential Real GDP (Blns) vs. Real Potential GDP (Blns) $14,500 $13,500 $12,500 $11,500 Potential GDP $10,500 Real GDP $9,500 $8,500 $7,500 $6,500 CBOPGDPR <Index>, GDP CHWG <Index> $5,500 1980 1985 1990 1995 2000 2005 2010 2015Source: BEA, CBO, BloombergRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 4. Employment To Be a Slow Train Coming Nonfarm Payroll Creation From Onset of Recession 102 100 98 73 - 75 96 1980 81 - 82 94 90 - 91 92 2001 07 - current 90 1 5 9 13 17 21 25 29 33 37 41 45 49 53 Source: BLS, NBER, Bloomberg MonthsRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 5. Employment To Be a Slow Train Coming -- II peak-to-trough % jobs lost Recession Date (months) total jobs lost (millions) months to job restoration peak-to-troughPeriod 1 1948-49 11 2.34 22 5.17 1953-54 10 1.71 23 3.33 1957-58 8 2.22 20 4.17 1960-61 10 1.19 20 2.16 1969-70 11 1.04 18 1.46 1973-75 16 2.17 19 2.70 1980 6 1.16 10 1.20 1981-82 16 2.84 28 3.09 AVG: 11 1.83 20 2.91Period 2 1990-91 8 1.62 32 1.40 2001 8 2.71 48 2.04 AVG: 8 2.16 40 1.72Period 3 2007-09 (current) 18 8.31 ? 6.03 Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 6. Limited Hiring by the Private Sector Total Private Hires, (thousands) Unemployed Workers per Job Opening 85,500 75,000 6 54,500 44,000 3 23,500 1 shaded areas are3,000 0 2001 2003 2005 2007 2009 2011 2001 2003 2005 2007 2009 2011Source: BLS, Bloomberg HIREPRIV Source: JOLTTOTL , USUETOT Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 7. No Words to Express this Stat Average Duration of Unemployment in Weeks 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 1948 1958 1968 1978 1988 1998 2008 Source: Bureau of Labor Statistics USDUMEAN <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 8. Little “Improvement” in Unemployment Benefit Claims Continuing, Emergency, and Extended Jobless Benefits (000) 12,000 10,000 8,000 6,000 4,000 2,000 0 2000 2002 2004 2006 2008 2010 2012 Source: U.S. Department of Labor INJCEUC, INJCEXB, INJCSPRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 9. Trusted Street Indicator Says We are in Recession ECRI Weekly Leading Index Smoothed Growth Rate (%) 30 20 10 0 -10 -20 -30 1990 1995 2000 2005 2010 Source: ECRI, Bloomberg ECRWGROW <Index> <GO>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 10. Economy Set for An ‘About-Face’ Leading Economic Indicators (Y/Y%) vs. Real GDP Growth (Y/Y%) 8 12 10 6 8 6 4 4 2 2 0 -2 0 -4 -6 -2 -8 -4 -10 GDP (lhs) -12 -6 -14 LEI (rhs) GDP CYOY <Index> <GO>, LEI TOTL <Index> <GO> -16 -8 -18 85 95 05Source: Bureau of Economic Analysis, The Conference BoardRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 11. Key Barometer Emitting Signs of Frailty Conference Board Ratio of Coincidental-to-Lagging Index 105 100 95 90 85 80 1990 1995 2000 2005 2010 RTCL <Index> Source: The Conference BoardRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 12. If GDP Dips to 2.0% -- It’s Recession Time Real GDP (Y/Y %) 14 12 10 8 6 4 2 0 -2 -4 -6 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008Source: NBER, BEA, Bloomberg GDP CYOY <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 13. Robust Fed Index Points to Sub-Par Performance Chicago Fed National Activity Index Three Month Moving Average 1.00 0.50 0.00 -0.50 -1.00 -1.50 -2.00 -2.50 -3.00 -3.50 -4.00 90 93 96 99 02 05 08 11Source: Federal Reserve Bank of Chicago CFNAI <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 14. Railcar Loads Are Plunging Real GDP (Y/Y%) vs. Railcar Loads of Waste/Scrap (Y/Y%) 40 8.00 30 6.00 20 4.00 10 0 2.00 -10 0.00 -20 -2.00 -30 Railcar Loads (lhs) Real GDP (rhs) -4.00 -40 RAILWAST <Index> -50 -6.00 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: Association of American Railroads, BEA, BloombergRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 15. ISM & GDP Trends Lower ISM Real GDP (Y/Y%) vs. ISM PMI GDP 65 6 60 4 55 2 50 0 45 -2 GDP (rhs) 40 ISM (lhs) -4 35 -6 1987 1991 1995 1999 2003 2007 2011 NAPMPMI <Index>, GDP CYOY <Index>Source: ISM, BEARichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 16. ISM Price Slump a Recession Signal ISM Price Index 100 90 80 70 60 50 40 30 20 10 1970 1980 1990 2000 2010Source: ISM NAPMPRIC <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 17. Coincidental-to-Lagging Ratio Trending to Downturn Conference Board Ratio of Coincidental-to-Lagging Index 105 100 95 90 85 80 1990 1995 2000 2005 2010 RTCL <Index> Source: The Conference BoardRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 18. Manufacturing Gains Not Generating Jobs Industrial Production Index, Manufacturing Jobs (000) 20,000 105 100 18,000 95 16,000 90 14,000 85 12,000 80 10,000 75 MFG Jobs (lhs) IP (rhs) 8,000 70 1995 2000 2005 2010Source: Federal Reserve, BLS USMMMANU <Index>, IP <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 19. Manufacturing Gains Not Generating Jobs IP Expansions (%) & Associated Manufacturing Job (%) 35.0% 29.4% 30.0% 25.0% 20.0% 16.7% 15.5% 15.0% 10.0% 5.0% 2.0% 0.0% -0.5% -5.0% -10.0% IP MFG Jobs -15.0% -13.2% 1995-2000 11/2001-2007 6/2009-current Source: BLS, Federal Reserve, BloombergRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 20. It’s 1941 For Manufacturing U.S. Manufacturing Employment (in thousands) 20,000 19,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 1940 1950 1960 1970 1980 1990 2000 2010 Source: Bureau of Labor Statistics USMMMANU <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 21. Auto Industry a Fraction of Its Old Self Light Weight Vehicle Sales: Autos & Light Trucks 20 in millions 15 10 Source: U.S. Dept. of Commerce; BEA, Bloomberg 5 1990 1995 2000 2005 2010Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 22. Won’t Get Any Jobs from Housing Residential Construction Spending ($ mls) Construction Employment (thousands)700,000 8,000 7,500600,000 Spending (lhs) Jobs (rhs) 7,000500,000 6,500400,000 6,000300,000 5,500200,000 USECTOT <Index>, CNSTRESI <Index> 5,000100,000 4,500 Source: U.S. Department of Commerce, Bureau of Labor Statistics, Bloomberg 0 4,000 1993 1997 2001 2005 2009Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 23. This is what the Fed is Trying to Revive? Residential Investment as a Percent of GDP (%) 8 7 6 5 4 3 2 1947 1954 1961 1968 1975 1982 1989 1996 2003 2010Source: BEA PFIVRESI <Index>, GDP CUR$ <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 24. Housing Depression Continues Mortgage Bankers Associations Purchase Applications Index 550 500 450 400 350 300 250 200 150 100 2005 2006 2007 2008 2009 2010 2011 2012Source: Mortgage Bankers Association MBAVPRCH <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 25. Home Prices Falling Again S&P-Case-Shiller Home Price Index AZ-Phoenix 300 CA-Los Angeles CA-San Diego CA-San Francisco CO-Denver 250 DC-Washington FL-Miami FL-Tampa 200 GA-Atlanta IL-Chicago MA-Boston MI-Detroit 150 MN-Minneapolis NC-Charlotte NV-Las Vegas 100 NY-New York OH-Cleveland Source: S&P/Case-Shiller OR-Portland 50 TX-Dallas 2000 2002 2004 2006 2008 2010 2012 WA-SeattleRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 26. Commercial Construction Slump Total U.S. Commercial Construction Spending ($ mlns) $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 1993 1996 1999 2002 2005 2008 2011Source: U.S. Census Bureau CNSTCOMM <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 27. Steep Slump in this Forward-Looking Indicator U.S. Architechture Firms "Work-on-the-Boards" Billings Index 65 60 55 45.9 50 45 40 35 30 1996 2000 2004 2008 2012 Source: AIA ARCHWOTB <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 28. Retailers Headed Out of the Malls Regional & Strip Mall Vacancies 12.0% 11.0% Strip Mall Regional & Superregional Malls 10.0% 9.0% Source: Reis Inc. 8.0% 7.0% 6.0% 5.0% 4.0% 2000 2003 2006 2009Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 29. State & Local Governments May be a Ticking Time Bomb State & Local Government Employment (in thousands)14,800 5,25014,600 5,200 5,15014,400 5,10014,200 5,05014,000 5,00013,800 4,95013,600 4,900 Local (lhs)13,400 4,850 State (rhs)13,200 4,80013,000 4,750 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: BLS USEGSTSA <Index>, USEGLCSA <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 30. Earnings/Analyst Conference Calls
  • 31. Bloomberg Orange Book Summary of Commentary on ____________________ Current Economic Conditions By CorporationNI ORANGEBOOK <GO> from earning statements commencing July 1, 2010 Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 32. What is Being Said… “And so were still seeing that midnight shopping in our stores when that EBT card, its like a debit card, when it is ready and it is funded, there are people who are in the store at midnight because they know it turns on. And they have shopped from like 10:45 to midnight and theyre waiting for that card and then our lines open up. And weve had some of our busiest ours at midnight.” Rosalind Brewer, EVP, Wal-Mart April 12, 2011“I think the most telling indicator for us that economic weakness and employment is the keyissue driving soft volumes, is the fact that we continue to see, as – in contrast to the historicalnorms, we continue to see volume pick up heavily at the beginning of each month, and thensteadily erode through the month, being particularly soft in the last week to 10 days of themonth. That just tells us that people are running out of money.” Gregg Engles, CEO Dean Foods May 10, 2011“Now clearly when it gets to the end of the month and theyve run out of dollars and thefirst of month gets there, youll see some pick-up in sales. I would say its not as dramatic asit was two years ago due mostly to the fact that not 100% of those benefits are gettingloaded on to peoples cards..” J. Michael Schlotman, CFO, SVP Kroger May 17, 2011 Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 33. It Pays to Read those 200 Transcripts… Fed Ex Total US Package Shipments (Y/Y%) vs. Real GDP (Y/Y%)GDP Shipments 8 10.0 6 5.0 4 0.0 2 0 -5.0 -2 -10.0 -4 Real GDP (lhs) Shipments (rhs) -6 -15.0 1999 2001 2003 2005 2007 2009 2011Source: Federal Express, BEARichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 34. Small Businesses Drive the Economy NFIB Small Business Hire Plans Unemployment % Hire Plans 3.0 24 4.0 18 5.0 12 6.0 7.0 6 8.0 0 Unemployment Rate (Inverted scale) 9.0 NFIB Hiring Plans -6 10.0 USURTOT <Index>, SBOIHIRE <Index> Source: NFIB, Bureau Labor Statistics 11.0 -12 97 00 03 06 09Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 35. Not Enough Fuel in the Tank Real Disposable Personal Incomes (Y/Y%) 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 -6.00 1990 1995 2000 2005 2010 Source: Bureau of Economic AnalysisRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 36. Not Enough Fuel in the Tank -- II Average Hourly Earnings (Y/Y%) by Industry Other Services Lesiure & Hospitality Education & Health Professional business svcs. Financial Activities Information Utilities Transportation & warehousing Retail Trade Wholesale Trade Manufacturing  PCED Inflaton 2.14% Construction Mining & Logging -1.0 0.0 1.0 2.0 3.0 4.0 5.0 Source: Bureau of Labor StatisticsRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 37. A “Miserable” State of Affairs U.S. "Misery" Index (%): CPI + Unemployment 25 20 15 10 5 1980 1985 1990 1995 2000 2005 2010 Source: BLS, Bloomberg CPI YOY <Index>, USURTOT <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 38. What Happens When the Stimulus Ends? Government Stimulus Driving IncomesIncomes in $ billions $10,500 $10,000 Real Dis Pers Inc Real Pers Inc Ex-Transfers $9,500 $9,000 $8,500 Source: BEA, Federal Reserve Bank of St. Louis, Bloomberg $8,000 2000 2002 2004 2006 2008 2010 2012 PIDSDCWT <Index>, PIDSPINX <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 39. Recession Comparison of Real Incomes Real Incomes Ex-Transfers From Onset of Recession 106 104 102 100 98 96 73 - 75 1980 94 81 - 82 90 - 91 92 90 2001 07 - current 88 1 5 9 13 17 21 25 29 33 37 41 45 49Source: BLS, NBER, Bloomberg MonthsRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 40. Collapse In Credit Card Debt, Still Uncertain Monthly Change in Consumer Revolving Debt ($ billions) 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12 2007 2008 2009 2010 2011 2012 Source: Federal Reserve CICRRRTL <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 41. No Typo, Over 45 Million People at or Below Poverty! Supplemental Nutrition Assistance Program Number of Participants 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 2007 2008 2009 2010 2011 2012Source: U.S.D.A, Bloomberg FDSPNUM <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 42. The Sub-2.0% Rule Here is Not Encouraging Real Final Sales, Y/Y (%) 10 8 6 4 2 0 -2 -4 1950 1960 1970 1980 1990 2000 2010Source: BEA, Bloomberg FLSLCHAN <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 43. The Sub-2.0% Rule Here is Not Encouraging Real Consumption Expenditures (Y/Y%) 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: BEA, Bloomberg PCE CONC <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 44. There is No Holy Grail of Economic IndicatorsRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 45. ‘Fab Five’ – Dining Out Spending: Dining Out(Y/Y%) 8 6 4 2 0 -2 -4 -6 98 01 04 07 10 RPCEDPMB <Index> <GO>Source: BEA, NBERRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 46. ‘Fab Five” – Jewelry & Watches Spending: Jewelry & Watches Y/Y% 16 12 8 4 0 -4 -8 -12 -16 -20 98 01 04 07 10 Source: BEA, NBER RPCEDJRY <Index> <GO>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 47. ‘Fab Five’ – Cosmetics & Perfumes Spending: Cosmetics & Perfumes (Y/Y%) 9 6 3 0 -3 -6 -9 98 01 04 07 10Source: BEA, NBER RPCEDCOS <Index> <GO>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 48. Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 49. ‘Fab Five’ – Women’s Dresses Spending: Womens & Girls Clothing (Y/Y%) 12 9 6 3 0 -3 -6 -9 98 01 04 07 10 RPCEDWGC <Index> <GO> Source: BEA, NBERRichard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 50. ‘Fab Five’ – Casino Gambling Spending: Casino Gambling Y/Y% 24 20 16 12 8 4 0 -4 -8 -12 -16 98 01 04 07 10Source: BEA, NBER RPCEDCAS <Index> <GO>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 51. Trade Picture isn’t Looking Too Encouraging…Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 52. Trade Helped During the Housing Bust, But No Longer Convincingly Contributor Contribution to GDP Residential Spending & Trade 3 2.44 2.5 2.22 2.21 1.95 2 Residential Trade 2 1.55 1.5 1.37 1 0.79 0.44 0.42 0.42 0.5 0.43 0.38 0.4 0.5 0.24 0.25 0.1 0.15 0.09 0.03 0.06 0 -0.06 -0.01 -0.12 -0.1 -0.5 -0.27 -0.25 -0.26 -0.41 -0.34 -0.62 -0.55 -0.6 -0.59 -0.72 -0.73 -0.68 -0.76 -1 -0.91 -0.97 -1.13 -1.18 -1.21 -1.19 -1.5 -1.24 -1.26 -1.36 -1.43 -2 -1.97 -2.5 06 07 08 09 10 11 12 Source: BEA GDP %NETX <Index>, GDP%RES <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 53. Money Beginning to Enter Goods Market to ‘Chase too Few Goods’ C& I Loans Large Commercial Banks ($blns) 900 800 700 600 500 400 300 200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Federal Reserve, Bloomberg ALCBLCID <Index> Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 54. Inflation Not A Primary Concern Personal Consumption Expenditure Deflator (Y/Y%) 6 5 4 3 2 1 0 -1 PCED Core-PCED -2 90 92 94 96 98 00 02 04 06 08 10 12Source: BEA, Bloomberg PCE YOY <Index>, PCE DEFY <Index>Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737
  • 55. This is an exclusive presentation from Bloomberg Brief Economics.Bloomberg BRIEF Economics is a new, groundbreaking publication written by leading economists in US, Europe and Asia, published byBloomberg, the premier source of data and analytics in the financial world.Bloomberg BRIEF Economics is already read by thousands every morning and you’ll soon see why – the Economics Brief provides aclear, concise snapshot every morning of all the key information you need to know:• Valuable insight and independent analysis from our renowned economists whove spent decades on Wall Street including Joseph Brusuelas Michael McDonough, Tamara Henderson, Richard Yamarone, David Powell and Niraj Shah.• Proprietary data and commentary that gets beneath the numbers with eye catching charts.• Guest columnists from top-tier firms.• Exclusive publications such as the Orange Book, Quarterly Economic Overview, Daily Economic Outlook Videos and much more!Your time is valuable. Maximize it by switching to Bloomberg BRIEF Economics today.Take a free 30 day trial today!Or visit www.bloombergbriefs.com for more information. Richard Yamarone, ryamarone@bloomberg.net, TEL: 212-617-8737