March less lousy than February, so far

Not so lousy is a pretty low bar. So far in March, about a third of the official statistical reports have headlined good news at the topside. Next week we’ll learn a bit about trade—foreign and domestic—and get or first look at prices.

New orders for manufactured goods decreased $6.9 billion or 1.9 percent to $351.9 billion in January. This was the sixth consecutive decline—a modern record. The drop in orders accompanied declines in shipments, inventories, and unfilled orders that also extended those losing streaks into record territory. The unfilled orders-to-shipments and inventory-to-shipment ratios both rose, although the orders backlog rose slightly faster. All the bad news was somewhat less bad than last month, but was bad nonetheless—and extending the run of bad news certainly isn’t good.

If one had read the recent GDP revision, one was expecting the worse-than-originally reported news on productivity. In the business and nonfarm business sectors, productivity declined 0.4 percent in the fourth quarter of 2008, rather than increasing as reported Feb. 5. In both sectors, this resulted from a 3.2 percentage points downward revision to output, with hours little changed.

Consumer credit increased at an annual rate of 3/4 percent in January 2009. Revolving credit increased at an annual rate of 1-1/4 percent, and nonrevolving credit increased at an annual rate of 1/2 percent. This is good news; shrinking credit, along with deflation, poses huge risks. Glad to see an uptick here.

Nonfarm payroll employment fell by 651,00 in February and the unemployment rate rose from 7.6 to 8.1 percent. Over the past 12 months, the number of unemployed persons has increased by about 5.0 million, and the unemployment rate has risen by 3.3 percentage points. If the current downturn were to see the same degree of increase in the unemployment rate as had occurred in long recessions in the past, there would be about half a point more to go.

Our proprietary index of labor market conditions fell sharply as all five indicators went bad. In declining order of their contribution to the fall, they were good-producing employment, unemployed 15 weeks or longer as a percentage of the civilian labor force, the unemployment rate, aggregate hours index, and employment-to-population ratio. The gap between the declining index and its 6-month trailing moving average widened slightly and is at a level exceeded only in the long recession of 1973-75 and the sharp decline of 1980.