Sunday, October 11, 2009

Economic Survey October 2009

I considered digging my Businessweek out of the trash for an easy layup of a post, but instead I wanted to look at a survey of some current economic data points.

1st I saw this at Calculated Risk earlier this week. I highly, highly recommend his blog. He does some analysis but he always has good data and charts for the periodic economic reports that various government agencies generate each month. This is the JOLTS survey.

from Calculated Risk
What's important to note here is how the graph works with the blue line and the green & red bars being the most important. The green and red make up the loss of jobs. The green is persons who have quit and the red is the layoffs. The blue is the amount of hires. Obviously when the blue line is above the green and red column the economy is adding jobs.

When I read the chart it is telling me the turnover in the economy is slowing. Both hiring and loss of labor is slowing down and there is also structural unemployment as workers switch from housing and finance related careers to healthcare and government roles. People are not leaving their jobs for new opportunities, it seems as everyone is hunkered down. This is especially bad for young people who are trying to enter the workplace with their new degree (Bachelors and Masters) in hand. As the turnover falls people are not advancing upwards creating new entry level jobs. Some anecdotal evidence is here, and here.

The yellow line represents job openings. Obviously more data points would be helpful, this survey was only begun in 2000 but job openings at its lowest level does not portend well for the economy.

Second on my economic survey is the trade data. Again Calculated Risk did the heavy lifting with the charts.

1st We look at it on an absolute level. The drop in trade is breathtaking. However, the economy has also grown in the past 15 so we should look at this data in real terms as well. I should probably do this myself but I am lazy and will just tell you that it isn't any worse than it was in 2002 in "real" terms as a percentage of GDP. Here is a chart I found after a minute of Googling.

Here is my updated chart from the BEA.

So it reaches about 5% and has now contracted back and expected to do so in the near term. However, the near term means about 5 years. Here is what happened this month.

via Calculated Risk
You should enlarge the chart to get a good feel for it. Here Calculated Risk has shown the deficit in goods/services with oil removed, oil by itself and then the total. So even though the data point is improved overall (blue line) it was because oil was cheaper in this month. We actually imported more goods/services. [The removal of oil is because of this line of thinking: oil will be whatever it has to be because it the lubricant of the economy, so we should remove it to see what the underlying consumer is actually doing.]

Maybe a few brown shoots but I still don't see the green shoots.

Currently my trading model has longs in equities emerging and domestic, real estate US and ROW, bonds both emerging and domestic, gold. Shorts are in commodities and managed futures. However, I expect that this stance will not last very far into the new year.

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