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Posted by on Aug 28, 2009 in Economy | 24 comments

Is The Economy Looking Up?

Three indicators suggest the answer may be yes.

First, orders for durable goods jumped 4.5 percent from June to July, the largest gain in two years.

Durable goods orders are what economists call a leading indicator for manufacturing. If you’re familiar with project management, they are akin to a dependency in that they have to be in place for manufacturers to run production lines. A durable good is defined as one with a lifespan of three or more years. Some durable goods are really big, expensive and, well, durable, like airplanes.

AngryBear notes that this jump includes a lot of commercial airplane orders. When civilian aircraft orders are excluded, the increase is a more moderate 1.9% month to month. But even a moderate increase is noteworthy, beause durable goods orders have trended down since March 2008; in June, they dropped 1.3%.

The economy isn’t ready to embark on a marathon, however. CNN reports that “compared to the same period last year, new orders were still down 25.8%.”

The second positive note relates to housing. The S&P/Case-Shiller U.S. National Home Price Index indicates average home prices are up 3%. This is the “first quarter-to-quarter increase in three years.” If housing prices have indeed hit bottom, then the economy is on its way to recovery.

The final note relates to consumer confidence, which seems to be up. Consumer outlook is at its most optimistic since December 2007, according to the Conference Board, which has been charting confidence for four decades. Gallup, however, has survey data moving in the opposite direction, while ABC survey data show confidence is up. Economics is called the dismal science for a reason!

What do you think? Up or down or flat?

This article first appeared at Newsvine

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Copyright 2009 The Moderate Voice
  • One more thing. The economy is recovering with only minimal “help” from the federal government and the winter stimulus, because most of that money has not been spent, only allocated.
    And the Congressional Budget Office made a forecast about the recovery sans stimulus — that recovery would probably begin in 4th quarter 2009. Fourth quarter starts in October. Congress ignored that forecast (akin to rearranging chairs while the Titanic is sinking: we must do something!) as well as the one pointing out the negative long-run impact of all that borrowing.

  • DdW

    I have been optimistic about our recovery for months now. Alas, I am no expert.

    But finally some confrimation from someone who knows. Thanks.

    And, or course, the Right is already out to deny Obama any credit whatsoever for the recovery, if and when it comes,

    E.g., the economy was going to recover anyway; it wasn’t the stimulus, it was the opposition to it, etc., etc

    • Hi, D.E.

      Neither the Ds nor Obama can take credit for much of this recovery, if by credit you mean “all that money that we allocated for the stimulus in February.” Because the economy isn’t a light switch. The CBO said in Jan/Feb that the economy would recover late 2009 **without** the stimulus!

  • mikkel

    I think it can be summed up in one sentence.

    “Confidence rebounded in late August as consumers increasingly expected improved conditions in the national economy even as they reported the worst assessments of their finances since the surveys began in 1946,” the report said.

    The pessimists have been saying for the last three months that they expected increased production to replenish inventories and create a technical recovery, but that the demand wouldn’t actually materialize due to household debt overhangs. We shall see I guess.

    • Good call on the individual assessment. That might explain the difference in the Gallup results.

  • Jim_Satterfield

    I think the pessimists are right, mikkel. For a while we’ll see numbers that seem to indicate a technical recovery but it won’t be followed by a recovery in jobs and compensation and since our economy depends so much on consumer activity we will either see a double dip recession or one of the most anemic recoveries in history that will flatline well below the previous level of economic activity.

    • We had a jobless recovery, pretty much, under Bush also. Remember, he barely squeaked by the record set by Hoover -> fewer jobs at the end of his term than at the start.

  • DLS

    Kathy, the indicators may say “looking up,” and certainly those in government who want to benefit from such an interpretation have said that, and want us to believe that.

    But what do you currently see, never mind what you might be led to foresee?

    • Hi, DLS:

      I may have a degree in economics but I don’t have a crystal ball. πŸ™‚

      Seriously, there are systemic changes working their way through the economy: the effects of limitless digital information (“Free” – “abundance”) on a system that is predicated on scarcity. Recovery will be, IMO, slow. Some retail outlets aren’t coming back. News as I have known it my entire life is going through wrenching change; we don’t know what that model will look like. (I recommend EPIC2015 if you haven’t seen it.)

      My advice for high school and college graduates: if you like to do things with your hands, then focus your skills there. Jobs that have a geographical and/or “atoms” component can’t easily be outsourced.

  • tidbits

    Like Dorian, I make no pretense at having expertise in this area. The uptick in durable goods has been forecast by many, not because of an improving economy but, as Mikkel points out, to replenish drastically reduced inventories at the retail level. The uptick is good news, but may be very temporary.

    Consumer confidence depends on which poll you read. Pick your poison.

    Following up on a point Dorian and KEG made, albeit from different angles, it is possible that the “stimulus”, targeted to be spent mostly in 2010, could have the effect of pushing a recovery well into next year, giving the recovery an opportunity to take hold.

    • I would have felt a LOT better about the stimulus if it had been focused on infrastructure (think “investment”). We’ve been robbing Peter to pay Paul for the last three decades: look at our highways system, the electric grid, transit, water and sewer lines. All crumbling. :-/

      Repeating myself: the CBO projected recovery WITHOUT the stimulus.

      Where the “stimulus” has probably done the most good is in extension of unemployment benefits.

  • I also concur that the pessimists are somewhat right, mikkel. While there is no question we’re seeing an imprvement which ndicates a technical recovery but without a recovery in jobs we will likely either see a second leg down. Remember that 70% of our 2008 economy was all consumer spending. The historic level is more like 65% and now with Americans saving as much as 10% vs. spending more than they earning the year before, where will the growth come from in light of fast approach 10% unemployment rate. Also keep in mind that the gov’t figures do not show the millions who are under-employed (i.e part timers while they want/need full time work) and who are not counted because they are no longer on unemployment roles because they could not find a job and their benefits expired. There is no solution to the lack of consumer spending, it is a real and behavior changing response to a recession that has multi devastating progs beyond normal recessions. Here you have a financial crisis (banks will not extend credit for likely another 1-2 years), real estate market crisis (remember the 80’s decade of no real estate price appreciation) under and unemployment crisis and counsumer spending that can easily be rachetted down as unemployment grows or just continues as is; gail slim
    at phentenin

    • We cannot “consume” our way out of the mess we are in. And we have to realize that an economy built on a steady diet of consumer spending is an economy built on sand.

  • michaelD

    lets see …

    jobs continue to evaporate to the tune of nearly 1/2 mm per month; july’s birth/death adjustment was one of the highest on record, artificially deflating the number AND the number of jobless no longer accounted for because they’ve given up looking is growing and further masking just how bad the job market is.

    the FDIC DIF is nearly empty after bailing out 84 banks [as of this evening’s thank-god-its-bank-failure-friday party] this year and a few hundred more are likely to be shuttered in the next year or so. oh, something like 1/4 of all US banks are reportedly unprofitable and have insufficient reserves to cover their obligations as required by the laws we’re not enforcing. after all, mark-to-market is such a bore and really mark-to-fantasy is far more … um … well … less honest.

    we’re looking at one of the worst back-to-school shopping seasons on record. stores like k-mart and sears [i know, i know … they’re the same company … SHLD] are bringing back lay-away of all things since customers who have to buy the necessities can’t afford them and their available credit is contracting at a maddening pace. is it really true that parents are putting pens, pencils and notebooks on lay-away?!!? we just pulled forward what few car sales we might have had over the next few months via the cash-for-clunkers program so we’ll likely see something of a collapse in sales over the next couple of months. btw, hope everyone enjoys paying taxes on their $4500 government stimulus payment for their clunker and REALLY have fun with the new car payment that replaced the [likely] paid-off trade-in. my oh my … the US consumer [70% of US GDP; 20% of the global GDP] is just roaring back, isn’t s/he?

    what else ?? oh yeah … that uptick in home sales is the last minute rush of buyers taking advantage of the $8k first-time home-buyers incentive which ends in november [closing by november … NOT contracting] … and the numbers of foreclosures sitting on banks books that they don’t want to move on [there’s that nifty mark-to-fantasy issue again] will hold back any attempt at recovery as soon as they’re placed on the market. whats REALLY nifty is so many of those buyers were in such a hurry because they’re HAVING NEW HOMES BUILT … but i’m sure that won’t add to the overhang of unsold and underwater homes. underwater? thats the folks who have mortgages bigger than the value of their house and now prime borrowers are feeling that as well. so much so that it appears that nationwide nearly ONE-HALF of mortgaged homes are in this situation!

    we have a lovely intermediary in the form of the private insurance companies funneling BILLIONS of [increasingly deflated] US dollars per year out of the economy and given the amount of lobbying dollars they’re spending on their bought-and-paid-for senators and representatives it isn’t likely that we’ll dump that burden any time soon.

    lets not forget the massively hugely monstrous deficit the US treasury is taking on and that the fed is [apparently illegally] monetizing at YOUR expense. no audits needed, thank you very kindly.

    so, sure … the economy is great … if you’re one of the banksters that operate their wholly-owned subsidiary known as the US gov’t and you’re able to pay yourself humongous bonuses for your dramatically bad world-economy collapsing failures while they arrange for even more of your [deflating] fiat-currency to be siphoned into their collective pockets. after all, borrowing from the gov’t [you] at 0% and loaning to you [the taxpayer] at something north of 25% on your credit cards is a dramatically profitable spread to be enjoyed all while ripping you off with staged overdrafts and other fees to the tune of $38b / yr.

    one last wondermous indicator of just how grand the economy is … so many of the statistics we’re treated to are seriously fiddled with [unemployment comes to mind] so as to look less bad than they really are. but there is one thats just plain hard to fudge: US employment tax receipts. it seems that money is taken out of your check every time you’re paid and reported to the IRS. as of 8/26 those numbers are increasingly dramatically BAD … and here’s the chart i found that reveals that … .

    so … no … is the short version … the economy is NOT improving. at best the rate of decline is slowing. the question is are we approaching a bottom or did we hit a little dip in the road before plunging off of the next cliff?

    • First, I certainly did not say that the economy was “great” and I don’t know of anyone who is saying this – with or without a straight face.

      The fact is that a slowing in the rate of decline IS improvement, even if that is all that these data represent.

      It is also a fact that the national debt is a disgrace and we, the boomers who are “in charge” are culpable. I’ve already ranted about cash-for-clunkers. Don’t remember reading you in those comments. πŸ™‚

      • michaelD

        greetings and felicitations. in reverse order:

        you’ve never read any of my commentary regarding your C4C work because i only recently discovered which is where i read this article. while i have perused any number of pieces on that topic i don’t believe yours is among them. i stumbled upon moderate in my never-ending search for actual news sources since the mainstream [corporatized] media is so woefully inadequate. it remains to be seen whether moderate will be something i read frequently or occasionally or at all … that simply depends on the signal-to-noise ratio which, on the internet, is exceedingly low. if you care to supply a link to your writings about C4C i’ll happily have a look.

        i have seen no reliable data-points which suggest the economy is improving. none. nada. zip. if you can provide any i’d be grateful. certainly the monthly unemployment reports and weekly initial / continuing claims reports come nowhere near suggesting economic improvement. bear in mind i place little or no stock in consumer confidence surveys, esp ones which are still registering at or near historic lows. they are of very low value in determining the state of an economy. up until late 2007 any number of confidence surveys yielded resoundingly positive results while we have since proven that our economy was no longer in a precarious situation; it had already started rolling over and most people had been living in an over-levered fantasy-land for the better part of a decade. would you care to put those surveys on display as evidence of just how well our economy was performing at the time? in point of fact every data-point i’ve seen which is remotely positive and suggesting recovery is either the result of a poll [which can say whatever the polling entity wants it to say], is presented so as to exclude the portions which contradict the point being made, or they are positive movements well within the margin of error of the study. as to your contention that the economy is improving by virtue of it getting worse at a slower rate i would heartily disagree. if i fire a pistol into the air the massive specific impulse of the powder burning off launches the bullet into the sky at a prodigious rate. in fact it begins to decelerate almost as soon as it leaves the barrel. it is proceeding upwards but its loosing velocity [negative delta-v]. by your standard of getting better that bullet is no longer ascending. the economy is not improving … it appears [by all objective measures] to be getting worse, presently at a slower rate of decay than we were experiencing a few months ago. throughout the duration of this recession [candidly i believe the recession ended some months ago with the onset of the current depression] we will see a complex mix of fits and starts as we get worse at varying rates. just because we aren’t getting worse at the rate we did before is no reason to call it an improvement, much less a recovery. some of the data may improve but the overall picture is not. its bad and getting worse. as to the case-shiller ‘improvement’ … robert shiller himself suggested that this particular report could easily be a one-off and that its not improbable that we will see further declines. i am not quoting him but i did watch him speak to the issue live, on national television, right after the report was released. i’ll grant that “could be’s” and “not-improbable’s” are in no way evidentiary, but since we’re talking about one of the author’s of the study i believe his commentary on this issue has some merit.

        frankly i am incensed over the repeated [by the gov’t and MSM] straw-man assertion that the economy is improving. they discuss the topic and ask questions about how fast its improving, as if taking for granted that it is in fact getting better. the corporatized media want us to believe it so as to support their bottom line. the gov’t wants us to believe it in order to support their next campaign. but we’re doing nothing less than talking ourselves into a non-existent recovery which is no less hazardous than accepting phil gramm’s now infamous assertion that we were whining ourselves into a non-existent recession.

        lastly, kudo’s to you for taking the time to reply to each and every one of us who commented upon your article.

        • Hi, MichaelD – thanks! I hope you like TMV; I think Joe does a good job of bringing in a variety of writers. I used to write the USPolitics column at and write here sporadically. I have a master’s degree in agricultural economics from VPI&SU (Virginia Tech) but have not been a practicing economist for a long time. πŸ™‚ I teach digital communication at the University of Washington, having turned to academia after a career in public affairs and technical communication.

          Here are the C4C articles:

          The orders for durable goods numbers are *very* promising — more so if they hold for next month. These data are (a) reliable and (b) suggest that the economy has made a turn.

          • michaelD

            i had a pass over your C4C articles and i really don’t think that i could offer much in the way of debate; it looks like you and other commenters thoroughly hashed it all out. i really don’t believe that poorly-named program [but what don’t we use contradictory names for these days?] really accomplished much beyond — A) pulling forward what little demand could be scrounged up — B) destroying a sizable pool of perfectly serviceable 2nd hand cars which just puts more pressure on financially strapped buyers in need of transportation — C) increasing the debt load for people who had a paid-off vehicle.

            as to durable goods … i’d have to actually pull up the reports [on sunday morning? before coffee? nah…] but iirc they weren’t at all encouraging. there was a sizable bump from aviation [very volatile sector … THAT won’t repeat] and excluding that segment it was fairly awful. down around a positive one percent print, wasn’t it? maybe even not a full percent? wonder what the margin of error is on that one …? the other thing that stood out at the time, and i don’t recall if it was coincident with the report or an actual component thereof, deere [DE] came out and frankly took a dump all over any hopes of a recovery from their perspective. something about the declines accelerating in july? they’re kind of an important indicator wrt production. they build farm and construction equipment. seems nobody [figuratively, not literally] is buying farming equipment or construction equipment. this … bodes … well …?

            i think the best we can hope for in next month’s durables is that we get a bump from the automotive sector as they partially replenish the product line from the C4C sales. its not like they’ll fully restock the lots though for obvious reasons. whirlpool just announced the closing of that IN plant. while its not closing yet i doubt they’ll be ramping up any time soon if its capacity they need to shed. as to computers … dull [DELL] came out with their heavily cherry-picked 10Q and ceded that businesses aren’t buying much of anything. intel [INTC — never a terribly forthcoming or reliable source imho] issued their grand forecast which continues to be contrary to what most/many other chipmakers are saying. sure they’ll sell some cores for netbooks and such but thats not going to be any great boon. their one hope is that after the debacle known as ‘vista’ that buyers will go for new systems to run win7 on … but what if they don’t? what if those that feel the need to upgrade simply … well … buy the upgrade?? after all, its not at all uncommon for windows users to buy an upgrade and only after several frustrating weeks of trying to make it go that they relent and replace the unit entirely. how many already have recent systems [courtesy of getting vista which required way more resources than XP] which will be more than robust enough to run win7? that might eventually prove to be a bump for the sector but none of this is going to make a difference in the near-term. as to businesses … the ones that are laying people off to the tune of 1/2 mm / month … do we REALLY expect them to refresh all their desktops and notebooks when what they have is working fine for them AND they can consolidate / redistribute their existing workstations to employees who remain? i keep hearing rumblings of the next great stimulus plan .. cash for refrigerators [C4R ??] or perhaps it will be a more generalized cash for appliances [C4A ??] … and so we can borrow still more money from china [IF they will cough up and lend it to us!] for everyone [well … as many as bought a new car perhaps] to replace their existing ones. and where are they going to put them? in the homes for which they received a NOD a couple of months back?

            any actual recovery is going to be all about the consumer consuming. the consumer won’t consume so long as they don’t have jobs and are in danger of loosing their homes … if they still have their jobs or homes in the first place. and that can’t happen until they de-lever, which is increasingly difficult with banks pulling out every stop to inflict every shady bit of pain they can in a last-ditch effort to retain some semblance of solvency [which 1/4 of them are failing to do]. if you are schooled in economics then you know as well as i do, better in fact, that the current unemployment condition is far worse than is being reported or harped upon in the media, the banks are in way worse shape than is generally recognized much less admitted to, and that GDP is in far worse shape than realized. after all … what was it they did last month? they revised Q2 down by nearly a full percentage point from -5.5% to -6.4% …? and that was after downgrading the entirety of the previous year?!?! last thought … the treasury and the fed have nearly doubled the money supply … nearly doubled it! … why is it that we’re not seeing a seriously pucker-inducing rise in inflation? could it be that deflation which is far more insidious than inflation [economically] is so bad as to offset the spiraling inflation we should be experiencing? i know the velocity is down and that cash is being hoarded; that has an impact too. but i don’t think it fully explains what we’re seeing.

            about the only ‘good’ news is see is that every [surviving] business has streamlined and when/if a recovery does dawn they’ll be very well positioned to capitalize on it. but will that lead to immediate job growth? or will they add slowly, boost deflated wages slowly, and stuff any gains they can into the collective pockets of the c-suite?

    • RipTideCA

      I agree with you there. also there is talk of a bubble brewing in china, their governemts response was very similar to that of ours… pumping money into the system. how long can that last ? in china or this country?

      Im hearing all sorts of things, most is negative.. if there is one thing most americans can agree on, its that are economy can possible get worse and that these signs of recovery are nothing more than wishful thinking.. personally I can believe why people would think that. if china suffered from a bubble you can be assured we would be screwed. but china is just part of the problem, our debt has caused countries especially china to question our fiscal responsability as a nation. they are looking for ways to distance themselves from us, they have also been using the dollars they bought from us, to purchase oil reserves and basically to increase their sphere of economic influence. if they dont experince a bubble of their own, then they will surely surpass us.

      It is possible to believe that we are in the early stages of the decline of this country, what that exactly entails isnt known … but life in this country will be hell of alot harder than it ever has been.

      • RipTideCA

        Forgive the spelling error’s I was in a rush.

      • michaelD
      • michaelD

        china is an increasingly complex subject, one i’m not really able to understand and disentangle.

        in the first place they are almost certainly falsifying a great number of their economic reports. i mean, they are a bubble and they learned bubble-building from the best, right?

        second, they are clearly doing everything they can to corner the market in any number of commodities such as oil, aluminum, copper, etc. i can’t lambast them on that issue. buy-low and sell-high is at the very heart of capitalism and they seem to be very canny when it comes to such things.

        lastly they are stuck squarely betwixt a rock and a hard place when it comes to buying our debt. i’ve no doubt that they don’t wish to be investing in the US dollar* … they have as much as stated that they would rather see the world move on to a different reserve currency [the yuan no doubt]. but on the other hand they’re so over-invested in them that if they stop buying or start dumping as the subsequent crash in the value of the dollar would cause them no small amount of fiscal pain. i’m sure they have some wonderfully machiavellian plan in place to work themselves out of this untenable situation but i haven’t the first clue as to what it might be.

        as to your point about the decline of this country, that in and of itself is a sizable subject … one that touches on politics, transfer of wealth, economics and marketing … but i think it might be outside the scope of this venue … at least it is for me right now.


        PS … no worries on the spelling! πŸ˜‰

        * … in fact, it appears that a far larger portion than most people realized of current treasury sales are being bought up by the federal reserve from primary dealers [in the form of open market operations … POMOs … i forget what the ‘P’ stands for], in some cases almost as soon as they’re issued. this is monetization of US debt which ben bernanke stated in front of congress that we would not do

        • trabuco


  • michaelD
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