We all know, or think we know, about the economy. Some of the things I read about it (eg, "Buy Gold, Buy Guns and Get Ready") make me cringe. But it ain't that bad.
Yes, consumer confidence was down in July, but consumer expectations tend to track the stock market; market down, consumer confidence down. And consumer sentiment is hurt by things like the debt-ceiling fiasco, S&P downgrade, European problems and the like. Exports are down, but the falling dollar will help exports. New home sales are weaker than we would hope, but in the six months ended in July they rose 6.8%, so there is growth there. Yet new home sales are only 20% of the housing market, and existing home sales are stronger.
Are there any bright spots? Indeed, there are. Don't put your wealth into guns and a zombie-proof wall just yet.
1. According to Challenger Gray, announced layoffs for August appear to be 23% lower than anticipated due to hiring. A lot of the jobs shed will be (and have been shed) by state, local and the federal governments.
2. Private sector payrolls increased 91,000 in August, according to ADP. In fact, private sector payrolls have been gaining since early 2010, and government employment has been declining since late 2010, according to Labor Dept. data. Government complains that business is not hiring (somewhat true), but it is government shedding the jobs.
3. Initial jobless claims continue to decline generally. The trend is downward, which is very good, although occasional spikes will still be seen. People are going back to work, just very slowly.
4. In July, orders for durable goods increased 2.4% and factory goods 4.1%, both higher than expected. The survey-based ISM manufacturing index for August was down today, but was better than expected. And survey respondents indicated they are more likely to be hiring than laying off workers.
5. Consumer and business spending has been significantly higher than expected. Retail sales for May and June were revised upward and July sales were much higher than expected. August retail sales were OK (+4.4% instead of expected 4.6%), but Irene dented sales at month end. Retail sales re holding.
6. After-tax corporate profits in Q2 rose at the fastest pace in the last twelve months. U.S. companies are sitting on $2.5 trillion in cash. They are, if anything, overcapitalized. This is why so many are buying back stock or hunting for acquisitions.
As the Alcosta Growth Report put it recently, "we do not anticipate a recession.