America Just Declared The Recovery Over So You'd Better Get Ready For The Double Dip

[AllentownJake]

Today's bleak consumer confidence number is undoubtedly bad news for the economy. The bigger than expected drop suggests that consumers have lost confidence in the recovery, which will drive down home prices and consumer spending.

Consumer confidence is typically our "first look" at the state of the economy. While most government aggregated data come out with a two-month lag, or more, consumer confidence hits with just a one month lag. Studies have shown that consumer confidence is a good predictor of consumer spending numbers. Basically, people surveyed seem to be good at accurately reading their own economic situation, and those surveyed accurately reflect the broader economy. When consumer confidence drops to such deep unexpected levels--today's were the worst in 27 years--then it is a flashing red-light about the economy.

There wasn't anything good about today's numbers. Every part of the survey was awful. On jobs, the optimistic folks who say jobs are plentiful fell to 3.6 percent from 4.4 percent. The pessimistic people who said jobs are hard to get increased to 47.7 percent from 46.5 percent. The gauge of expectations for the next six-months fell to 63.8, from 77.3 the prior month. The share of people who believe their incomes will increase over the next six months fell to 9.5 from 11 percent. The share of those expecting more jobs fell to 12.4 percent from 15.8 percent.

http://www.businessinsider.com/america-just-declared-recovery-over-so-youd-better-get-ready-for-the-double-dip-2010-2
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I really hope this is the end of "Trickle Down" theory.

[ixion]

1. yep

it's comin'...

[AllentownJake]

2. it never left

it paused.

[ixion]

9. fair enough

agreed.

[leftstreet]

3. Great (lowering of) Expectations n/t

[Lisburn]

4. Indeed !

Where I am (Pennsylvania) the economy is awful !
In my lifetime (59 years old) I have never seen anything like this.

Regards

[SoCalDem]

5. What on earth did they expect? "Service" economies are fragile

When the only money that stays in a locale, is money that low-paid workers pay each other to "do for" them, and all the profit is pocketed offshore or into CEO's accounts, what did they think would happen?

The FIRST thing to go, when a family gets afraid of losing a job, or when their retirement accounts/investments are gutted, is the services/extras/goodies they used to enjoy.

Most families cut back on the extras, as they concentrate on paying down debts already incurred, or to paying off that house (if they can).. They cut out movies, haircuts, dinner out, shopping-as-a-pastime, etc.

The people employed in those jobs get laid off as business drops, and then their employers start ordering less, and the spiral starts...and once started, it gets worse.

[depakid]

16. Them Walmart & McDonalds jobs don't pay very much- and unlike local businesses

the profits don't circulate among other businesses in the community.

Proliferation of those sorts of employers is pretty much a guarantee of increased poverty and an overall decline in the economic health of an area.

[divvy]

17. You can't outsource many service jobs.

That is the only reason why the republicans left us with a service economy. The house that needs to be painted is on walnut street and not in China.

You are right on about the ripple effect too. It will ripple the other way soon enough. There are plenty of people who want to get back into the business of making a living.

[Jackpine Radical]

6. Well, I never thought the recovery was on in the first place

so this news isn't much of a surprise.

All the jubilation over signs of an Obama recovery were somewhat premature.

[AllentownJake]

7. I think they really believed if they said things were getting better enough

They would.

Positive thinking bullshit.

People respond to realities.

[divvy]

8. Maybe you are watching too much Fox news.

Don't get me wrong, this is the worst recession we have had since the great depression. I do think, and so does much of the equity markets, that the worst of this recession is over. We have been battered since the Fall of 2007, so it is pretty easy to believe that this dismal job market will persist forever.

The biggest problem really is with jobs, and this too could change during this year. This is a recent report from Fidelity's top economist which reads not too uncommon these days. She points out that the last two economic recovery's were "jobless" recovery's and this one is shaping up to be different. 7.5 million jobs were lost as a result of the bushtapo's criminal incompentance but there is reason to have hope. Read this:

https://news.fidelity.com/news/article.jhtml?guid=/FidelityNewsPage/pages/fidelity-jobs-recovery&topic=economy

What we are experiencing now (in terms of the stock market) is called a "sideways market". Sideways markets are common and happen every so often. Money will be made, as it always is, but most people will be decieved by simply watching the market indexes. Most growth will come from small and mid sized companies which are not represented in the S&P, Dow, Nasdaq, or Total Stock market indexes. People who invest in broad market indexes will probably do poorly over the next 7 years.

This is a chart illustrating the performance of the S&P 500 since 1895.

[AllentownJake]

10. These were consumer confidence numbers

As most people who know my postings know, I give two shits about what the DOW has to say about the actual health of the economy.

[divvy]

11. I am very well aware of tthe consumer confidence indexes

Individuals are typically lousy predictors of the capital markets. Most sell at the bottom (as in March 09) and buy at the top (as in October 07). Conumer confidence can be a negative predictor for this reason. When people are the most afraid, that is when the largest changes happen in the opposite direction. The same is true when most people are overconfident. Disaster is just around the corner.

Check out the AAII sentiment index. And this is an index of finance professionals. They too tend to be negative indicators.

I bought lots of stocks in March 09 which is the exact opposite of what most "consumer confidence" indices were indicating. I made a buttload.

[ThomCat]

19. He's talking about the economy of the vast majority of people,

not the economy of investors.

The economy you're talking about only affects the small number of people who can afford to have a lot of money invested. The economy he's talking about is the one for people who live paycheck to paycheck, or don't have jobs, probably rent, or might not have homes, and worry about the price of food and whether or not they can afford to feed their families.

So telling him to check out this index or that index is missing the point.

[girl gone mad]

23. If you were a true contrarian you would be short equities..

and long treasuries right now since this is the precise opposite of what most institutional investors are doing.

You probably wouldn't be quoting some generic Fidelity analyst, either. Just saying.

[Coyote_Bandit]

12. Wall Street numbers and measures

don't mean sh*t to the majority of Americans - nor do they reflect their financial realities.

Hell, most of those numbers and measures don't even reflect the realities of US business. Those DOW numbers reflect the stocks of 30 companies - multi-national companies utilizing international labor, resources and markets. WTF does that have to do with the US economy? Not much.

[divvy]

13. Well, where DO you work?

My guess is that you work for a company somewhere. When the larger ones prosper, the smaller ones tend to get more business. More folks are employed, and more have money to spend.

You may THINK the capital markets are meaningless until you realize that where you work is a part of those same statistics. As is the broader economy.

[JVS]

14. Wow, a new type of trickle down theory, now between firms.

[divvy]

15. That is not exactly how it works.

But there is a direct correlation between raw material producers, manufacturers, retailers, and consumers. The whole dynamic is more complex than that of course, but it generally holds true. When you sell more cars, then there are more people employeed by companies who do business with outfits like ford, chevy, gm and so on. The economy is really nothing more than all of these relationships in aggregate and the capital market are where larger businesses get money to create products and jobs.

[girl gone mad]

24. Small business sentiment is as weak as it's been in decades.

Lending to small businesses is declining.

The economic pep squad needs a new routine.

[Coyote_Bandit]

18. Ummmm......

I'm one of the throwaways. Late 40s long term unemployed single female with three graduate degrees and two professional licenses. I have an intimidating resume that does not lend itself to lateral transfers or entry level career changes. I have the "luxury" of being able to re-train and have returned to school - technical school where I am learning a trade (bench jewelry and gemology). In my last "real" job I worked for a small privately held company as an investment portfolio manager responsible for handling several hundred million dollars in various assets. I assure you that even among the wealthy many do not understand Wall Street measures. Nor do they care. Their evaluation of the economy often reflects their personal fortunes. If you were to study behavioral finance you'd find that is generally true of most of us.

FWIW, I didn't say capital markets were meaningless. What I said was that the DOW specifically does not reflect the US economy. If you want to cite a market index that reflects an improving US economy then please do. But keep in mind you need to cite an index that includes only US businesses utliziinging US labor and resources and selling products to US markets. Otherwise your data is tainted by the strength or weaknesses of various foreign influences (e.g., cheap labor).

The DOW in particular is a very poor measure of US economic performance. Here's a link to the 30 stocks that comprise the DOW stock indices:
http://money.cnn.com/data/dow30/

Perhaps you'd like to explain just exactly how the stock performance of these multi-nationals reflects US economic performance.

[divvy]

21. Well, I did not author Dow theory.

The Dow Jones industrial index has a high statistical correlation to the S&P 500 which tracks the 500 largest companies in America, it is nearly 1. The same is true for the mid and small cap indexes. The correlation is not as strong, especially with small caps, but it is still above .7 This means that 70% of the time, the stocks of the small cap index move in the same direction and magnatude.

Even with those 30 stocks, you still get a pretty good idea of the economic climate in the US. Take a look at the names on that list again. If wallmart is selling more groceries, Catipillar is selling more bulldozers, Boeing is selling more new jets, do you suppose that this scenario would indicate a worsening economy? If you think about it, it would even indicate the likelyhood of hirings or firings.

I am sorry about your employment situation. I do know how much that sucks. At the same time, I do feel that there is cause for hope within the employment realm. This article here gives some good reasons.

https://news.fidelity.com/news/article.jhtml?guid=/FidelityNewsPage/pages/fidelity-jobs-recovery&topic=economy

[Coyote_Bandit]

26. Ummmm......

So the DOW correlates to the S&P 500. Big fuckin deal. Here's a list of the 500 companies that are included in the S&P 500. Do tell just how many are not multi-nationals.
http://en.wikipedia.org/wiki/List_of_S&P_500_companies

Show me how the DOW correlates to US business. By that I mean US owned companies utilizing US labor and resources and selling primarily in the US market. You can't do it. Wall Street has conveninetly neglected to create an index that measures such domestic performance. How convenient.

Your understanding of DOW theory and economics in general is basic at best. It is apparent that you've never studied behavioral finance and probably not logic or evidence.

Hint: If you want to use some objective measure to prove that the US economy is improving then that measure needs to be one that measures US economic performance. That's not the frickin DOW or the S&P 500. Why? Because the performance of the large multi-national companies that dominate those indexes does not reflect US economic performance. Why? Because these companies are not exclusively owned by US interests. These companies often utilize significant non-US labor and other resources. In addition, the US market may not be their only market - or even their primary market. You can't believe everything you're told. Just because somebody tells you the DOW or the S&P 500 are a measure of US economic performance doesn't make it so.

But, hey, if it makes you feel better you are certainly welcome to pretend that's just exactly what it means. It might help you feel better about the lackluster economic performance under the current administration and Congress.

The single most important thing that could be done to stimulate the economy and create jobs would be to make significant stimulus money available for small business creation and growth. We should be embarrassed that we haven't already done that. But then I guess not all the bulbs in the present administration burn brightly........

[divvy]

27. Forget making rings, contact a Nobel Economist !

You certainly have something meaningful to say!

[Coyote_Bandit]

28. Ummmm......

I believe in censorship - and practice it regularly. Somehow I don't think you'd mix and mingle well at my next dinner party and I'm certainly not obligated to extend the invitation. Bye now.

[divvy]

33. Ok then, lets try again

From my viewpoint, simply dismissing evidence catagorcally does not make for good dinner party conversation either. You had convinced me that no matter what I said, it would simply "be dismissed".

There are MANY measures that determine the scope of economic activity in the US. At some level ALL of these measures are read and acted upon by members of the financial community. This not to say that this informal consensus is either always right or wrong because it is not. There are always expectations and emotions that are involved too that can be misleading. The capital markets, for better or worse, is the primary spot where this information is digested hour by hour, and each arbitrage tends to provide more information as mistakes are realized and opportunites seen.

On the surface, I would agree with the complexities due to the multinational nature of business today which you assert, but I would do so for different reasons.

Against this backdrop, the one indicator that I find useful is the yield curve. Now, the same spurious arguments can be made against it because of the multi-national nature of modern debt ownership. Unfortunately, we cannot return to the days when markets were more pristine and homogenous. Nontheless, the yield curve is very steep, almost historically steep which is a powerful predictor of sustained economic development / recovery when it remains steep, and a consistant predictor of recessions (that may or may not effect the capital markets) when it inverts. For now, it, along with many others, says economic recovery. The curve can invert if some meaningful improvement is not realized in employment. The market is forward-looking so this tipping point can be hard to determine, but for now, the consensus seems to be for more future employment.

[ThomCat]

22. It is because of those kinds of blinders that economists and

corporate executives totally miss the personal, social and environmental costs of business.

If you wear blinders so that all you see is business, and generally accepted rules of business you deliberately don't see anything except business.

That's really sad.

[galileoreloaded]

29. Sigh. Adjust it for inflation now. Whoops, not quite what you thought.n/t

[mmonk]

20. It won't be the end of trickle down.

They will still blame those imaginary liberals and Obama's "Marxism". This is a country of clowns.

[TexasObserver]

25. I'll bet the DOW is higher and Unemployment lower on 12-31-10.

That's where I think we end the year.

The DOW higher than today.

Unemployment lower than today.

[sendero]

30. The "recovery".....

.... was a governmental and media created fiction. There is no recovery.

I know I sound like a broken record, but it is what it is. And there is no recovery without jobs, PERIOD END OF STORY.

Keep being careful with your money, as it is going to be hard to come by for the next several years.

[TheWebHead]

31. that's quite a bit of hyperbole

if you look at consumer confidence figures they have a sawtooth pattern with frequent 10 point monthly swings. I think people should calm down a bit about it. The consensus is that we'll grow over 3% in 2010 and over 4% in 2011... and by the way, people should be happy about it, I've shaken my head at this yearning for a double dip or wrapping arms around liberal economists who have never managed money or run a profitable business lecturing about how dire things are as markets rise month after month and their dour GDP forecasts have proven foolish. GDP growth = smaller deficits = more employment = better outcomes for congressional democrats and the president... optimism ain't so bad.

[scheming daemons]

32. It's what Jake does best

..

[AllentownJake]

34. Someone elses opinion

Mine is there was never a recovery. Just borrowed money spent.

[Selatius]

35. I never thought we really had a "recovery." We just slowed the bleeding, not stopped it.

If it's true to say that the stimulus package was too small and that the bank bail-outs were merely papering over fundamental problems in the financial sector, then it's really hard to see that the economy ever really started its climb back up but merely slowed its decline up until now.