June 2, 2008

Under the Weather Update

Filed under: Economy,Taxes & Government — Tom @ 1:04 pm

Have been fighting a sore throat and until now, the sore throat has been winning.

Here are some quick thoughts in what I think will be the only post of the day, unless I pull it together later this evening.


Hillary’s outperformance at the polls in Puerto Rico, while irrelevant to the general election, is stunning nonetheless. How does a candidate “of color” only get 32% of the vote?


Apparently the presidential candidate I refer to as “Mr. BOOHOO-OUCH” (Barack O-bomba Overseas Hussein “Obambi” Obama – Objectively Unfit Coddler of Haters) wants us to believe that he hasn’t had much to do with Fr. Michael Pfleger, famous lately because of his Hillary-bashing at the Trinity United Church of Christ. No way Jose (HT No Quarter) —

Obama and Pfleger are no strangers. Indeed, when Obama was in the state senate in Illinois, he conveniently arranged for Father Pfleger’s St. Sabina’s Church to receive state monies for its social programs. Of course, the guardians of church and state separation said nothing then and they are saying nothing now.

Update: O …. M …. G.


Despite the recession (/sarc), the Institute for Supply Management’s Manufacturing Index, covering about 15% of the economy, rose from 48.6% to 49.6%, beating expectations that it would come in at 48.5%. In other words, it went up decently when it was “expected” to go down.

This is still contraction, but by the barest amount (any reading over 50% would indicate expansion). For the recession-obsessed keeping score, ISM also noted that “the overall economy grew for the 79th consecutive month.”

Although I think this characterization is incorrect, I’ll let it out, since Thomson Financial did — “Any reading less than 50 indicates contraction, although ISM has said a reading above 41.1 percent indicates a growing economy.” I think the correct statement would be that any reading below 41.1 would be a definite recession.

Regardless, showing this graph from the WSJ (link probably requires subscription) would seem useful at this point:

The dark line is the Orders element of the index, which came in at 49.7%, while the red is the overall reading.

ISM’s Manufacturing Index and the Orders element fell all the way into the high-30s/low 40s in the last two recessions, including the one in 2000 or 2001 that didn’t meet the traditional definition of two quarters of negative growth in a row. We’re nowhere near that low, and, at least in the past two months (maybe three, I don’t remember), we’ve been heading away from it. That would be bad news for the recession-obsessed.

The ISM’s Non-Manufacturing Index, which covers the rest of the economy, and which went nicely into expansion mode last month, is coming out on Wednesday.

Maybe the idea that so many are insisting on claiming that we’re in a recession — not in danger of one, but IN one, right NOW — in the face of the ongoing rush of decent data is what’s really making me sick.

Update: The ISM’s release also shows that Production went into expansion mode in May, after two months of contraction.



  1. Well Tom, according to the folks at Poltical Calculations the odds of a recession have been falling for months and is less than 1% based on historical technical trends:


    Comment by dscott — June 2, 2008 @ 2:31 pm

  2. #1, that high, eh? (:–>)

    Though I don’t think what you linked to necessarily reflects current probabilities — more like future (12 months).

    Comment by TBlumer — June 2, 2008 @ 2:57 pm

  3. I was looking at the May 29 update of the Table 3.1. Government Current Receipts and Expenditures and see that corporate tax receipts were off by $38 billion in the first quarter 2008 but personal income tax receipts were up. This held true also compared to last year’s first quarter. So I could possibly interpret this as businesses took a sizable hit due to the fuel price increase.

    Comment by dscott — June 2, 2008 @ 3:13 pm

  4. Hate to always be the wet dishrag, but I’d be remiss if I didn’t point out that this metric printed in the 60s (yes, that’s the 60s, with one print close to 70) in the fall of 1973, just as the economy was sliding into one of the worst recessions of modern times. Not among the most reliable recession indicators.

    Comment by Invictus — June 2, 2008 @ 5:38 pm

  5. #4, As usual, you’ve got the basic facts wrong, and as a bonus, we get to see how NBER doesn’t get it.

    The BEA data show that there weren’t two consecutive quarters of negative growth until Q3 and Q4 of 1974.

    NBER “says” that the recession started in Nov. 1973, but growth during Q473, Q174, and Q274 was an annualized compounded 1.6% (+3.9, -3.4%, +1.2%). It’s bat-bleep crazy to call those three quarters a period of recession.

    When the REAL recession started, in 3Q74, ISM manufacturing dropped below 50 for the first time in Sept. and got as low as 30.7 in Jan. 1975. It got back above 50 in Aug. 1975.

    The mid-1970s recession wasn’t as rough as the ones of the early 1980s if you include what NBER includes, but it was right in there if you don’t:
    – 2Q80 – minus 7.8%, 3Q80 – minus 0.7%, annualized -4.2% for two quarters
    – 2Q81 through 3Q82 – annualized about minus 1.5% for six quarters
    – 4Q73 through 1Q75 – annualized about minus 1.4% for six quarters
    – 3Q74 through 1Q75 – annualized about minus 3.4% for three quarters

    Manufacturing types and others have 2-1/2 to 3-1/2 decades of improved feedback mechanisms, making more recent experience with the predictive value of the ISM data much more relevant. In the 1970s, they were caught “sleeping” and thought that things weren’t going to get as rough as they did.

    Having to reach back 35 years to try to sew significant doubt is a sign of desperation.

    Comment by TBlumer — June 2, 2008 @ 6:07 pm

  6. Gee, let me double check my facts here on ISM:

    1973-09-01 63.5
    1973-10-01 66.2
    1973-11-01 68.1
    1973-12-01 63.6

    Let’s see…printed in the 60s in the fall of 1973. Check. One print close to 70, at 68.1. Check. NBER declares recession started November 1973. Check. Yeah, I really screwed up on that set of facts. And when — if ever — are you going to give up on that “consecutive quarters of negative growth” canard???

    Comment by Invictus — June 2, 2008 @ 6:39 pm

  7. #3, I think the corp part is likely what you said, at least in part.

    The personals are a tough call, because I don’t know if that includes withholdings or not. It could be that unincorporated or Sub-S types are paying in more because they had a good 2007 and/or think 2008 is going to be about as good.

    Comment by TBlumer — June 2, 2008 @ 7:15 pm

  8. #6, The numbers you supplied, along with GDP growth, combined with an unemployment rate of well below 5%, go to show that NBER blew the call. Oh, and employers added 1.13 million jobs (seasonally adjusted) in the last half of 1973. You screwed up on basic facts, with NBER’s help.

    The recession didn’t start until 3Q74. Growth negative, ISM contracting, unemployment at or above 5.5%, almost no seasonally adjusted jobs added from July-Oct, followed by -970,000 seasonally adjusted jobs lost in November and December. Once it started, it was pretty rough. But it didn’t start until 3Q74. Sorry.

    I’m not giving up on the two consecutive quarters of negative growth definition until NBER shows me that they own the dictionary. Which they don’t. That’s right, they don’t.

    Indeed, according to Wall Street Words, “The National Bureau of Economic Research formally defines a recession as three consecutive quarters of falling real gross domestic product.” Okay, I’ll concede to NBER. It’s really three quarters. Come back at the end of the year.

    And if NBER tries to push a “recession” on us if it ends up that there NEVER was a negative quarter of growth, esp never one below 0.5%, they’re out of their minds.

    Comment by TBlumer — June 2, 2008 @ 7:42 pm

  9. Well, if it’all the same to you, I’d prefer to hang around a bit.

    Now, you said I had “basic facts wrong” regarding ISM in late 1973 and/or the date the NBER declared the recession. I did not, as I clearly demonstrated. That you’re bringing in a whole host of irrelevancies is of no consequence to that part of the discussion. ISM was what it was, and the NBER said what it said. You are obviously free to disagree, but you are not free to claim I had “the basic facts wrong” when I clearly did not. Whether or not NBER blew the call is another discussion entirely that has zero to do with the data I presented. Frankly, an apology is in order, but I won’t hold my breath.

    Among the reasons I downplay the ISM is that this is — and will be for a while — a consumer led downturn, with Americans facing numerous very strong headwinds: A slack labor market, meager (if any) wage growth, spiking food and energy costs, record-tight credit conditions, just to name a few. Like businesses did in the aftermath of the tech bubble, consumers are going to have to mend their balance sheets. Given we’re collectively 70% of GDP, that is going to problematic for a while.

    Comment by Invictus — June 2, 2008 @ 8:02 pm

  10. You, and NBER, had the basic facts wrong. Period. You were misled, but you still had the basic facts wrong.

    Sort of like your version of “Bush lied.”

    The worst you can say is that Bush had the basic facts wrong because he was misled by CIA or whoever (although I think the history will show that he was speaking the truth, because there were plenty of WMDs found, and those that weren’t most likely went to Syria.).

    You’re in the same unfortunate position, having been misled by alleged experts at NBER. You’re not “lying,” you just have your basic facts wrong because you’ve been misled.

    Therefore, no apology is in order, but you’re free to leave if you’re so offended.

    Comment by TBlumer — June 2, 2008 @ 8:15 pm

  11. Come on, Tom, before me there was no one here to spice things up, and you’d miss me if I were to leave.

    The thing about NBER is that, like it or not, they’re the arbiters of recession dating. You can say what you want about them, that they’re partisan hacks or whatever, but that doesn’t change the fact that they’re the refs. This is clearly going to lead to a call of “hackery” when they declare a 2008 recession, but I guess we’ll cross that bridge when we come to it. And you can cite however many definitions of “recession” as you’d like, the only one that truly matters is theirs.

    On the Bush/Iraq/WMD thing, I’ll give you an “A” for effort in trying to bait me into an argument on that. I’ve got my opinions on that, too, as you might well imagine, but I’m going to keep them to myself. Suffice to say that mine differ slightly from yours. Or shall we just say that I’m not the least bit surprised by any of what Scott McClellan’s now saying, only that he’s saying it at all. But feel free to tell me how he was just a “lowly” press secretary if you’d like.

    Comment by Invictus — June 2, 2008 @ 8:56 pm

  12. As far as I’m concerned, NBER is an observer, not a referee.

    Comment by TBlumer — June 2, 2008 @ 10:37 pm

  13. Geez, looks like some research crossing my desk today also got its “basic facts wrong”: In November 1973 (the onset of a 16-month-long energy shock induced recession), the ISM was very close to its cycle high at 68.1. Not too long after that, the consumer rolled over, and what do you know, the ISM started to roll over as well, hitting a deep trough of 30.7 in March 75. Even in the early months of the 1980s recession, the ISM continued to tick higher and actually squeaked up above the 50-mark in February 1980 – one month after the official start of that downturn.”

    This will be a consumer story, not a business story.

    Comment by Invictus — June 3, 2008 @ 11:51 am

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