We first noticed the first signs that the economy was beginning to soften about three months ago. Now the evidence of a slowdown has become so overwhelming that it is difficult to avoid the conclusion that we are headed for a recession. We cite the following as evidence.
Retail sales (both total and non-auto) have dropped for three consecutive months. This has happened only five times since 1967—-four times in 2008, and one now. Vehicle sales have tapered off with May and June being the two weakest months of the year. Consumer confidence for both the Conference Board index and the University of Michigan Survey are at their lowest levels of 2012.
On the labor front, June payroll numbers were weak once again and averaged only 75,000 in the second quarter. The latest weekly new claims for unemployment insurance jumped back up to 386,000 and the last two months have been well above the numbers seen earlier in the year.
The ISM manufacturing index for June fell 3.8 points to 49.7, its first sub-50 reading in the economic recovery. The ISM non-manufacturing index for June dropped to its lowest level since January 2010. Most recently the Philadelphia Fed Survey for July was negative (below zero) for the third consecutive month.
The small business confidence index declined in June to its lowest level since October and has now dropped in three of the last four months. Plans for capital spending and new hiring have dropped sharply.
Despite all of the talk about a housing bottom, June existing home sales fell 5.4% to its lowest level since the fall of last year. In addition mortgage applications for home purchases have been range-bound since October.
Core factory orders, while volatile on a month-to-month basis, have declined 2.6% since year-end, and the ISM numbers cited above indicate the weakness is likely to continue.
The Conference Board Index of leading indicators has declined for two of the last three months and is now up only 1.4% over a year earlier, the lowest since November of 2009, when it was climbing from recessionary numbers. The ECRI Weekly Leading Index is indicating a recession is either here now or will begin in the next few months.
The breadth and depth of the slowdown are greater than the growth pauses experienced in mid-2010 and mid-2011, and indicate a strong likelihood of recession ahead. In addition the foreign economies will be a drag as well. A number of European nations are already in recession and others are on the cusp. The debt, deficit and balance sheet problems of the EU’s southern tier are a long way from any solution, and will not remain out of the news for long. China is coming down from a major real estate and credit boom, and is not likely to avoid a hard landing. The Shanghai Composite is in a major downtrend, declining 28% since April 2011. The view that China is immune because of their unique economic system reminds us of what people were saying about Japan in 1989.
The stock market is ignoring these fundamentals as it did in early 2000 and late 2007 in the belief that the Fed can pull another rabbit out its hat. It couldn’t do it in 2000 or 2007 when it had plenty of weapons at its disposal. Now there is little that the Fed can do, although it will try since it will not get any help, as Senator Schumer so aptly pointed out at Bernanke’s Senate testimony. In sum, we believe that the stock market is in store for a huge disappointment.
- Index of U.S. Leading Indicators Falls More Than Forecast – Bloomberg (bloomberg.com)
- Economic data add to signs of slowing recovery (rep-am.com)
- 12 Signs That The Next Recession In The United States Has Already Begun (judgementofamerica.wordpress.com)
- This is what a recession really is (business.financialpost.com)
- 12 Signs Showing The Next Recession In The U.S. Is Underway (GLD, TZA, FAZ, FAS, INDEXSP:.INX) (etfdailynews.com)
- Recession Now More Likely (blogs.wsj.com)
- 12 Signs That The Next Recession In The United States Has Already Begun (investmentwatchblog.com)
Wednesday, April 27, 2011
By Letters to the Editor/Gloucester County Times
To the Editor:
Joe Mingin (letter, April 17) made the tired accusation that Republicans didn’t care about the deficit when President George W. Bush was increasing it. What news media were he listening to all those years? The majority of conservatives were very critical of Bush’s spending, and said so regularly.
President Barack Obama has now increased our debt far more than any other president in history. He’s added trillions to the deficit with no thought of how we’re going to pay this all back. And this comes from someone who, just over two years ago, promised to cut the budget deficit in half by the end of his first term.
When pressed, all Obama does is talk about the need to raise taxes on the wealthy. There never seems to be a social program that he is willing to cut or do without.
The top 10 percent of income earners already pay more than 70 percent of all taxes, while the bottom 40 percent pay no taxes at all. According to experts, if all earnings were confiscated from every wealthy person in America, it wouldn’t be enough to pay our debt. It won’t be long before the middle class shoulders the burden for all those entitlements.
In his book, “The Roots of Obama’s Rage,” Dinesh D’souza makes a convincing argument tying Obama’s actions to his father’s anti-colonial views. In 1965, Obama’s father wrote in a paper that there is no tax rate that is too high, and even a 100 percent tax rate can be justified under certain circumstances. Barack Obama Sr. believed that the rich had gotten rich at the expense of the poor and, so, should give their wealth back to the poor.
In “Dreams From My Father,” Obama suggests that he has taken on his father’s dreams. D’Souza believes Obama is on a systematic campaign against the colonial system that destroyed his father’s dreams, and is “committed to keep going until he has brought that system down.”
With the help of left-wing financier and billionaire George Soros, it seems that President Obama is on the road to doing just that.
Leda Muth Pitman