Promising start to June

More than a quarter of the news that will be released this month is out and it has been evenly split between good and bad news. The month’s good news index is at 50.0 as we close out the first week of June.

New orders for manufactured goods have gone up two of the last three months after increasing $2.5 billion or 0.7 percent in April. Shipments, down nine consecutive months, decreased 0.2 percent. April’s unfilled orders-to-shipments ratio was 6.01, up from 5.98 in March. The inventories-to-shipments ratio was 1.45, down from 1.46 in March. (Mixed, an improving mix, but still a mixed bag.)

During the first quarter of 2009, productivity—as measured by output per hour—rose 1.6 percent in the nonfarm business sector; output fell 7.6 percent and hours of all persons fell 9.0 percent. Productivity growth for the first quarter was originally estimated at 0.8 percent. (A slightly better mix than the original report, but productivity gains driven by slower drops in output than hours aren’t as good as they seem.)

Nonfarm payroll employment fell by 345,000 in May, about half the average monthly decline for the prior 6 months. The unemployment rate continued to rise, increasing from 8.9 to 9.4 percent. (Bad news, and on close examination, not really less bad news than last month.)

In March, consumer credit decreased at an annual rate of 5-1/4 percent. A big, and troubling, portion of the decline came in the non-revolving credit line—stuff like auto loans and other credits such as loans for mobile homes, education, boats, trailers, or vacations. (Bad, getting credit back on a sustainable up-trend is critical.)

Although our proprietary index of labor market conditions fell by 2-1/2 percent, it still closed the gap on its 6-month trailing moving average for the second month in a row. In the past, a local trough in this gap has been closely associated with the end of a recession.