It’s the end of the third quarter of 2012, which is a decent time to look back and see where we are. Economic news has been incredibly mixed lately, which following our mantra that good news is bad news means that we really don’t know what to think. So let’s not try to think too hard and look ahead as we look backward at a strange quarter all around.
We’ll start with the jobs picture, which as noted before is either lousy or doing about as well as can be expected, depending upon which August report you believe. Unemployment Initial Claims (the measure of insured people laid off last week) dove back under 360k last week, a number that is consistent with an economy that is more or less moving sideways. It’s the perfect setting for an election, where the numbers can be spun just about any direction anyone wants.
Orders for “durable goods”, the fancy term for manufactured items designed to last at least three years, dove 13.2% in August. That number is consistent with a lousy jobs report. It’s also consistent with the diving consumer confidence index from August, which fell to 61.3 This is a survey where 50 is considered “neutral confidence” and 100 would be perfect confidence. Since this rebounded up to 70.3 in September for no apparent reason, we can expect things are moving forward again.
Meanwhile, the Dow Jones Industrial average gained a solid 800 points through the whole quarter. Some of this was anticipation and response to the Fed announcing QE3, the open-ended purchase of even more mortgages. The people with money to play with turned bullish on the US economy in 3Q12 and never looked back.
What drove the blahs this summer? It’s hard to tell, but the worst appears to be over – at least until it becomes worse again.
Meanwhile, news from around the world is not good. Greece is sinking into undeveloped-world status and the people are rioting. The Eurozone is constantly on the brink, with Spain trying to figure its way out of deficit without a lot of luck. Developing nations are slipping as well, unable to continue the amazing growth that made it look like this Depression is really a solid changing of the guard globally. Part of the reason the US Stock market is up has to do with the simple fact that we look pretty good right now, a decent sized duck in a really small puddle.
Looking ahead with what we have for guidance, it appears that we can expect to keep truckin’ along about as we have been. Barring a big screw-up or a major collapse, Obama should be re-elected and will probably have a pretty similar Congress to deal with for at least two years. That’s the bad news, at least when the budget comes to a head next December (after the election, ‘natch).
Meanwhile, there is other news that may or may not be important. The bank regulators in the UK have announced that there will be a “complete overhaul” to the London Interbank Offered Rate (LIBOR). This is the rough guesstimate for a decent rate set over cognac in a gentleman’s club that controls the terms of about $300 Trillion in global lending between banks. The fact that this controls so much, and has fallen to the UK alone to reform, is proof enough that the global economic system is antique and totally not up to the needs of the modern economy. No matter. A different set of gentlemen promise us it will all be better now.
Without any strong leadership to complete the necessary restructuring at home or abroad, we can expect that everything will keep marching ahead to the next inevitable scandal and/or crisis. What we can say about a strange quarter of ups and downs is that, in the end, it was the last of the summer – never a time to start a new project. That is, except the projects that will keep you warm in the coming winter. We’ll just have to see what happens when the snow flies.