Business Week is finally observing some reality, imminent recession
(my comments are in parentheses), rest is outline of weekend article
stock market is being buffeted by fed cuts and prospects of tax cuts
this optimism may be misplaced
strength of Q1 GDP figures showing 2.0% growth may be mirage
both GDP and recent consumer spending figures may be revised downwards drastically
never in last four decades has employment been falling in sustained fashion WITHOUT recession
employment figures have dropped severely in last couple months
forces are in place for employment decline, maybe full-fledged recession
May 8th reported sharp decline in productivity, and 5.2% rise in labor costs
((that is worst of both worlds for corporations))
that is biggest 6-month rise in labor costs since 1990
Dell, 3Com, Natl Semi just announced huge layoffs
((I have friend at 3Com in Mass2shits, and 1/3 of workforce is being laid off))
Help Wanted index is at lowest level since 1993
((services job growth has flattened, now showing negative acceleration))
college educated workers make up largest segment of layoffs now
to unprecedented degree, this is a white collar recession so far
over half of layoffs now are white collar
college educated workers make up for half of personal income in US
if recession hits, it may be shortlived
monetary and fiscal stimulus may start boosting growth in second half of year
((this is the nonsensical 2ndHalf Recovery scenario I find absolutely dreamy untenable))
pressure to cut costs will gain in intensity for corporations, to restore productivity
as productivity is restored, consumer purchasing power will diminish, thus spending will decline
((I have been saying accelerated layoffs will skewer spending by midsummer))
consumer credit rose only 4.7% annual rate in March, slowest rise since 1999
car/truck sales fell 10% in April, after an artificial rise in March, clearing inventory with promotions
household debt service is running at 14.3% of disposable income, well above the 1990 recession level
we have a consumer population leveraged to the hilt
((lower interest rates will not encourage more borrowing, esp as layoffs and jobfears mount))
Rubbermaid and RadioShack report 1.1% and 2% drops in April comparable sales
PC sales were up in March but are down in May, leading to Dell layoffs
price cuts at Dell, Compaq, HP, Gateway now spark a price war in PCland, more layoffs
Venture Capital dropped at annual rate of $60 billion so far this year
that translates into 300,000 highpaid jobs
((this also has led to ooching up prices here and there from lack of innovation competition))
smaller companies are moving toward more parttime workers to relieve health costs tied in labor
housing is still driving economic growth, but for how long?
housing and construction are likely to soften as employment declines further
"Housing is certainly going to be a negative going forward, and not a positive" according to Ken Rosen of Univ Cal Berkeley real estate economist
he expects 10-20% drop in construction activity in 2nd half of 2001, continuing into 2002
((this is the 2ndHalf Recovery, what a joke, JUST THE OPPOSITE, 2ND HALF DETERIORATION))
((here is why they are wrong))
govt data for GDP, consumer spending, employment typically OVERSTATE
they are revised downward later after REAL data come in
((this isnt even forecasting, rather from mindless trend continuation guessing, missing turns consistently))
in last recession of 1990, govt issued report of Q3 GDP of plus 1.6%
later revised to minus 0.7%, a decline
Q3 consumer spending was revised from plus 3.6% to plus 1.5%, more than cut in half
Q3 job growth was revised from plus 0.4% to minus 0.5%, a decline
why?
govt statisticians are missing up to half of the data needed to issue reports
Q1 GDP was issued recently with only half of the $4 trillion of needed data for consumer services
they use "judgment trends"
during normal times not marked by changes, those guestimates are pretty close
when economic change is underway, those guesses are way off
they are not forecasts, not even reports of data, rather guesses based on zero changes in trend !!!
"The US could still avoid recession in 2001. But with three months of declining employment on the ledger and more job cuts to come, that doesnt look likely."
((finally some reality, and less hope and guessing))
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Jackass Editorial:
finally, Business Week wakes up to the reality of costs pressures, its kneejerk response of layoff acceleration, its impact on spending, and the standstill likely to be seen in housing
the costs equations are horribly tilted toward accelerated layoffs continuing, as labor and health costs rise, productivity declines, and sales are flat
as Mullino kept saying "the engines of productivity will be abandoned, and prices will rise"
huge amounts of money were drained from the economy to pay for taxes in April, which deceived investors into thinking cash on sidelines was coming into the market
rather it went to join short covering in stocks, and pay for IRS taxes
the supertanker has changed direction, and a recession is due
it is actually almost 100% unavoidable
the only unknown to me is its depth
first they call it a Soft Landing
then only Techs will be hurt
then 2ndHalf Recovery
now "how deep will the recession be?"
in fact, I believe Q1 will show very small negative on GDP after all revisions
if not, then Q2 will show the first small negative on GDP
summer qtr Q3 will be the second or third negative
we havent even addressed the higher gasoline and electric and natural gas costs
they will have an additional dragging element on the economy
we may have fullblown recession by summer
you may read about it in September, wondering what hit you
my guess is the fed cuts and tax cuts (prospects therein) will support stocks in May
but after Memorial Day, we enter a new time capsule, ala Voltish
school lets out in midJune, and for two decades, tech stocks and other stocks dry up in June
I smell soft stock market for a couple months
if economic data gets real, and loses its fantasies, then we may test Naz1800 again
if a recession picks up speed, and I expect it will, then retest after retest of lows will give way to lower lows
this rally is a joke, predicated on hope, not reality, and spiced with incompetent govt data reporting
if we reported sales forecasts like that at Staples for Q1, we would be fired by summer
take it easy, RangerRick
always wish the best to you
my new job is going well, after two weeks now
in consulting firm now doing marketing research and some forecasting
trading account showing minor lifts in recent weeks, nothing special
just collected first paycheck in 16 months
feels good, but silly taxes
gotta pay for all that incompetent govt data reporting
and all those retired judges
not to mention the military and planes circling over southern China
/ JW |
