The mainstream press has already latched onto the story of a recovery that is slow but gaining strength, so this is hardly news anymore. But exactly how and why it is strong remains important in many ways. This is a restructuring more than a traditional recovery after a recession, so it takes a lot of time. The foundation has to be laid before the new economy can be framed on top of it. That foundation came through in 2012, but progress has to continue in key areas to make it possible for the jump to a new boomtime around 2017 or so.
Break out the expensive commercials and grill the burgers, we have a game!
The net gain of 446k jobs (by the ADP report) is weaker than the 529k gained in the first quarter, but it beats the 339k in the same quarter of 2012. There is always a slowdown in the summer, so we have to compare year over year growth more than anything. By that measure, things are definitely looking up.
Youth unemployment is not faring as well. We are looking at that as a key indicator that employers are hiring less skilled workers to fill jobs, which would be an indication of faith in future growth. Employers do not invest in employees over the long haul unless they think it will pay. By that measure, things don’t look as good – the gap between overall unemployment and unemployment among 20-24 year olds remains stubbornly fixed at 5.9%. Both measures dropped 0.2% in this quarter, to 13.5% and 7.6% respectively.
Prediction: Normalizing in the 60-70 range.
Result: Even better!
Consumer confidence is a fudgy number, a “How ya doin’?” kind of survey strained through a formula. Anything above 50 is considered a good sign. In 2012 this was soaring up as high as 80 before settling down into the 60 range. The prediction was that this would stay stable through 2013 as the economy slowly improved – steady improvement without a lot of acceleration.
We’re back at 81.4 at the end of June, a number that suggests slow but steady growth. It’s a good sign, one that was letting us down in March. A new number is due shortly, but should be in the same range.
Prediction: Remaining high.
Result: Turning into a steamroller!
This is important because hiring won’t pick up at big companies until profits do – and they are confident that profits will continue. Hiring is at least in part an investment in the future, and stockholders have to be satisfied today before any company can make plans for tomorrow. Profits are very high for many companies – in the 14% net return range, far higher than what is typical. It’s a hugely positive sign that is pushing stocks higher, the S&P500 up 13% for the year even after recent slides.
But hiring at big companies hasn’t come back yet. In June they posted their biggest share of hiring yet, 32% of total jobs, but that’s just one month of data. That will have to accelerate before we can be sure that things are moving the right direction.
Prediction: Continue rising.
Result: Turning into a bubble?
These data are the slowest to come in, and we’re only up to April on the Case-Shiller 20 city home price index. But it’s up 6% for the year in just 4 months of info. The rise in interest rates recently may cool things down, but it’s charging ahead rapidly.
So at the half, Barataria’s predictions are 4-1. It’s looking like we are building a real restructuring on the foundations put down in 2012. The only thing lagging is youth unemployment, which is a terrible problem. Get it next quarter?