Wednesday, June 3, 2009

Some Thoughts on the Latest Economic Data

So many green shoots, so little time. At the beginning of the week, the market got excited about the “better than expected” ISM report that merely showed that manufacturing is still shrinking but maybe not falling off a cliff. Then the pending home sales index was up 6.7%, which some interpreted as a sign that this whole housing bubble thing was overblown and everything is going back to 2007 levels soon. Pay no attention to mounting foreclosures, Alt-A and option ARMs that are set to blow in the next year or so, or rising unemployment data. Yesterday’s car sales data elicited many an enthusiastic headline about the recovery even though car sales were down 34% year-over-year at an annual pace of 9.9 million, which is just shy of the amount of sales needed for the already bankrupt industry to break even. As a side note, the car with the biggest year-over-year decline in sales was the Honda Civic, for which sales were down a whopping 61%. What did the innocuous Honda Civic do to insult everybody? Also, trucks are still enormously popular, despite everyone’s vow to become more “green” and stop guzzling gas. Today’s news release included the sobering private sector employment report referred to as the ADP. According to the ADP report, 532,000 jobs were shed in the month of May and April’s jobs were revised down by an additional 54,000 jobs. As Calculated Risk points out, the ADP is not necessarily a reliable indicator of this month’s nonfarm payroll report, but it does track the report over time. Nevertheless, the “green shoots” folks will likely ignore this grim report and wait for Friday’s big number. I’ll be traveling on Friday so I won’t be able to comment on the BLS employment report. But sometimes, numbers just speak for themselves and require no interpretation.


L said...

You gotta love the market's reactions to these numbers! Thanks for sharing this post.

Joshua said...

The ADP actually changed their methodology at the beginning of the year and have been more accurate so far in 2009 after embarrassing themselves in years past with overly positive data (admittedly in a smaller data size in 2009, they'll probably find a way to screw it up). It continues to amaze me that people put so much stock in these lagging, monthly, always revised jobs reports when there are weekly claims available every Thursday morning. This morning's claims data showed a slight improvement but jeez, don't expect a good payroll Friday for a long, long time.