perfect form

The main question: is the crash slowing down?

Answer: Maybe.  But, and this is a big but, the speed of the US economic implosion is amazing.  Look at this table from Simon Johnson & co. at the Baseline Scenario blog:

BEA data, all in 2000 dollars

Note especially Column D, lines 21 & 21.  We’re going to need another quarter to see if there is a real decline in the rate of shrinkage.

your choice?

For now, I’m sticking with L.  The shape of the recession-recovery, that is.  Clearly, a quick, strong bounce back — a V — is not in the cards.  And though we’re not past the point where a U is possible — a few months of flat spot followed by strong recovery — there are no engines in sight that could drive strong economic growth quickly.

Thus the “L” — we go down and stay down for a couple of years or more.   That’s been the assumption for the past several months.  Now some economists are modeling a “W” — a minor improvement followed by another slide before growth returns.

It could be — and it shows that economists are begining to be able to map what has so far been mostly mystery: an economy falling at unprecedented speed for reasons identifiable but not understoon.

For now, I’m sticking with the “L” assumption, maybe a tilted L allowing for halting growth over several years.

The Washington Post carries this excellent survey of the many different signals.  You decide.

Back on duty. Sorry for the gap. The final few days of the legislative session were intense and very long.

Still too soon for data — the state’s fiscal year begins July 1, so it will be late summer before any metrics send serious signals.  Using our three-legged ’smart recovery’ stool, here are my guesstimates of the legislature’s impact in some key areas:

WA FINANCIAL SYSTEM RECOVERY.  Some small fixes including much better regulation of the payday loan industry — but no major legislation.  Largely a federal area.

WA ECONOMIC RECOVERY. With the caveat that the leverage of the state’s $50+ billion spending leverage is on the margin of our $250+ B economy, let’s look at each of three goals:

ONE — Cushion the crash.  Made a major investment in unemployment benefits. But had to cut valuable health and social services programs.

TWO — Restart the economy.  About 54,000 jobs lost just during the 105 days of the session. But combination of transportation and other spending should create more than that. Our budget, in combination with the federal spending should have a major impact on stopping the crash and limiting unemployment.

THREE — Build the new, post-recession economy. Mixed success. Some progress toward new-era jobs but cuts to community colleges and universities plus cuts to already under performing K-12 system will not catapult us to the high skills state we need to be. Innovative business development tax incentives also very limited. No real progress on transitioning the state to a new energy economy. Some green shoots on attacking health care costs and quality.

WA GOVERNANCE RECOVERY. Some real progress here. Many agencies trimmed back hard — budget cuts should force some efficiencies. And some promising projects to overhaul executive ranks and start combing through agencies.  But those are promises, not hard progress.

Overall: a foundation.  Your assessment?  More to follow.

So far, no sign in unemployment that the crash is abating. It is a bit too soon to see any stimulus impact.

In the three months the legislature has been in session, the total unemployed in our state has increased by 54,000 — about 540 every day we’ve been in session.  Here are current official Bureau of Labor Stats data and the unemployed totals chart for the past ten years.

That is an amazing rise — nearly straight up!

Housing sales, housing construction — twin main engines of the US economy — have not revved up.  Here is an interesting, interactive chart in the New York Times.  Roll your mouse over any of the 30 price histories to see how housing prices behaved over the past 30 years.  Most interesting to see the differences.

Two surprises about the Seattle market: it climbed less than the really speculative places like SanFran and NYC; and it is staying higher than many.

great paper

Here is a useful graphic in the London Guardian showing the evolving British inflation numbers.  The chart is interactive, drag the blue bar to the right to see clearly the same deflation we’ve experienced here. And note that the retail price index dropped down into the deflation range but the overall CPI stayed up in the 3% range — showing, inter alia, the impact of energy prices which are again on the rise.

The Guardian site BTW is (one of) the most heavily trafficked news site in the world.

http://www.guardian.co.uk/

time to retrain

This severe recession is rearranging the economic landscape.  Already here is one of the prominent changes: women are about to outnumber men in the workplace.  The Financial Times reports that men are bearing the brunt of unemployment:

“It’s almost like a snow globe, the economy’s been turned over and we’re watching it settle in different ways,” said Gary Field, founder of Career Gear, a non-profit organisation that helps low-income men apply for jobs. He has seen referrals rise 35 per cent.

Men have been disproportionately hurt because they dominate those industries that have been crushed: nine in every 10 construction workers are male, as are seven in every 10 manufacturing workers. These two sectors alone have lost almost 2.5m jobs. Women, in contrast, tend to hold more cyclically stable jobs and make up 75 per cent of the most insulated sectors of all: education and healthcare.

And in a companion article, FT points out how this gender shift further downshifts family incomes:

The way the axe has fallen means that women have become the sole breadwinners in many households, supporting their partners and children. The problems that have plagued women in the workforce for generations are now everyone’s problems.

Women are paid less than men, and not just within the professional world. The blue-collar jobs that are vanishing are not low-wage: construction workers earn on average $840 (€644, £568) a week, against the average US wage of $616 a week. Health and education workers, in comparison, earn about $620 a week; the average weekly pay for a retail job is $385.

Women are also more likely to move in and out of the workforce, taking part-time jobs to look after children or relatives, amassing fewer benefits such as health insurance. Many households now relying on a woman’s income are struggling.

As long as we define green shoots as indicators that the speed of the crash is moderating. We’re still falling, just falling a bit slower.

McClatchey is carrying this report that the regional Feds are noticing an easing of the fall.

In another small but important sign of improvement in the battered U.S. economy, almost half of the Federal Reserve’s 12 districts reported Wednesday that economic deterioration had moderated in their zones and may be bottoming out.

The nation remains locked in the worst economic tailspin since the Great Depression, so any piece of good news is welcome. However, the report continued to underscore the downturn in manufacturing, more job losses ahead and a grim business climate, especially for commercial real estate. Overall economic activity contracted or remained weak in all districts.

“However, five of the twelve districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level,” the Fed’s “Beige Book” summary said.

Go here to take a look at the newest Beige Book report yourself.

The American cost problem

The Economist carries an interesting piece this week on the cost-cutting of some Indian entrepreneurs.

The chart shows the American problem: too much money is being spent both by on the public side (government-funded health care for the poor, elderly and employees) and on the private side (purchased health care, mostly by companies).

It is imperative — in my view — that we not define health care problem  as lack of coverage.  True, we have many too many people without proper health care insurance. But the starting point for reform must be an attack on cost — or better said, a push for much higher value: better outcomes at lower cost.

are we walking 34% more?

We Americans, especially out here in the West, were believed to be wedded to our cars.  Driving was the last thing we’d give up in a budget squeeze.  But our collective response to the recession is to park ‘em.  As the charts for March show, we’ve radically reduced both our car buying and our car driving.  Gas sales in March were down 34% from a year ago!

Here are the BLS stats to go with the chart:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $344.4 billion, a decrease of 1.1 percent (±0.5%) from the previous month and 9.4 percent (±0.7%) below March 2008. Total sales for the January through March 2009 period were down 8.8 percent (±0.5%) from the same period a year ago. The January 2009 to February 2009 percent change was revised from -0.1 percent (±0.5%)* to +0.3 percent (±0.3%)*.

Retail trade sales were down 1.1 percent (±0.7%) from February 2009 and 10.7 percent (±0.7%) below last year. Gasoline stations sales were down 34.0 percent (±1.5%) from March 2008 and motor vehicle and parts dealers sales were down 23.5 percent (±2.3%) from last year.

Here are the charts: Read the rest of this entry »