Brian Westbury Still Positive on Recovery
Back in early May we reported on how Brian Westbury was calling an end to the recession. At that time we thought the recession was more likely to end around July. On Monday, Brian wrote a market update that confirms his view that in spite of the weak June jobs report that the recovery was still on track. Several metrics reported below in fact typically only take place when the economy is recovering while the jobs report can continue to sputter. And when jobs do sputter it's likely because corporations are reaping huge profits from less employee expenses and higher productivity.
- The overall ISM Manufacturing index hit 44.8 in June while the production index hit 52.5.The economy is almost always growing when these indexes are at those levels.
- the four-week moving average for initial claims for unemployment insurance isdown 43,500 (or 7.1%), in the past 2½ months, again something that almost never happens unless the economy is expanding.
- In addition, personal consumption, new orders for durable goods, home sales, and single-family housing starts are all off the lows of earlier this year.
- Our forecast right now is that real GDP shrank at a 2.5% annual rate in the second quarter, with all of the decline attributable to inventory reductions.
- profits should accelerate sharply in Q2 because hours worked fell at a 7.9% annual rate. This means productivity growth (output per hour) must have soared. Infact, this helps explain why jobs growth has not turned yet –a technology boom is still boosting how much production companies can get from each hour worked.