Unemployment Claims Up, Durable Goods Orders Down, Oil Prices Up
Durable goods orders fell by nine percent in the latest reporting period, led by a dramatic fall in orders for transportation goods, particularly civilian aircraft. Automobile orders fell in the period, too. Surprising economists was the overall drop of almost 10 percent in defense-related orders for durable goods, especially since one component, defense aircraft, was up by nearly about 57 percent, which would mean that all of the other components of overall defense orders fell dramatically.
Orders for durable goods have managed to grow for the past several months, with the most recent drop coming in October of last year. The return to negative territory indicates that economic activity in January was beginning to slow as it had before the end-of-year holiday season boosted the economy. Among explanations for the decline in January, the most likely cause, at least in the civilian sector, is that businesses are facing or preparing for reduced final demand by consumers and other businesses. Additionally, rising interest rates on long-term borrowing—the kind that would be most appropriate for financing purchases of capital goods—are likely beginning to take their toll on business and consumer spending for big-ticket items.Dark Wraith CyberGloss
Durable goods are big ticket items that are assumed to last, on average, more than three years.
In market news today, most of the major stock indices scored decent rallies, with the blue chips index up by seven-tenths of a percent and the NASDAQ up by one percent. These gains put the overall market at about where it was before the hard drop early in the week; and it gives more evidence of a stock market stuck in a "trading range" that further lengthens the period in which investors are earning no significant gains in their portfolios.
Bond prices were either flat or slightly down for the day, meaning that yields either didn't change or moved slightly up. The lack of significant movement may indicate that investors are holding their positions relatively steady, waiting for economic news later this week and next that will give a clearer picture on what bond holding adjustments to make.Dark Wraith CyberGloss
A "trading range" is said to be happening when stocks go up one day and down the next, without any discernible, overall direction.
Oil prices hit $52 per barrel, to some extent on continuing concerns about possible OPEC cuts in production, but more fundamentally on the continuing and progressive weakening of the U.S. dollar. As the dollar continues to lose value against major world currencies, it takes more greenbacks to pay for anything that is imported. Even though the Bush Administration has publicly stated that it wants a stronger dollar, it has done nothing to actually stop the dollar's slide, primarily because, as foreign imports become more expensive, U.S. exports become cheaper in other countries, and this would help the American export industries financially, which could in theory bolster the domestic economy. This plan has not worked, though, because U.S. exports to other countries have not increased appreciably, and foreign imports are still coming in at a record pace. The result is that the greenback continues to weaken without any prospect for intervention to stop the collapse, and the hoped-for benefit of a boom in U.S. exports isn't materializing.
The only visible result to American consumers is that imported goods, like oil, become more expensive, while American jobs continue to disappear into the foreign countries that manufacture the imports still being purchased in record amounts in the U.S. The combination of continuing job losses, rising interest rates, and more expensive energy-related goods should not only prevent strong growth of the U.S. economy in the months ahead, but may very well push the economy into a recession that the Bush Administration and the Republican-controlled Congress cannot stop with fiscal stimulus because of the already massive federal budget deficits being run that would prevent any new spending initiatives to stop or control the economy's slide.Dark Wraith CyberGloss
"Fiscal stimulus" refers to government policy initiatives—like tax cuts, jobs programs, and other spending plans (even wars)—that put money into the economy and into consumers' pockets during hard economic times.
Published 2/25/2005 01:57:00 AM
<< 24 Comments Total
It seems to me the "Dow" has been in a trading range between 10,000 & approx. 10,500 for some time now, hasn't it?
Oh, for the days when one could reasonably speculate about the Dow topping 15,000!
(sigh)
- oddjob
Good morning, once again, OddJob.
You are correct. We have seen a classic, old-fashioned "trading range" for months, and investors who have been holding "index portfolios" have been realizing no appreciation in their investment.
What's worse is that it is index portfolios that would probably be the most common for the new private Social Security account investors to use, at least at first, because of the automatic diversification such portfolios provide. And once these investors saw that they weren't earning anything, they would start to move out of the index portfolios and into portfolios that were more eclectic, which would only worsen the situation because they would then start to bear "diversifiable risk" for which the market will never reward them.
Gruesone outcomes: they're not just for war-mongers, anymore.
The Dark Wraith grumbles.
Then you have this:
GDP growth revised up
Report puts fourth-quarter growth rate at 3.8 percent, up sharply from prior 3.1 percent estimate.
It has gotten to the point where I find it hard to believe just about anything our esteemed sheepherders put out.
Good morning, OddJob.
What do you think would happen if you adjusted that number to correct for the actual, underlying inflation that was making the number look nice and fat?
(And don't get me started on the "CPI" or "GDP deflator"; let's talk actual inflation.)
The Dark Wraith snorts.
Ah, that was you, Mr. Goat.
My apologies.
The Dark Wraith adjusts his reading glasses.
[AAAEEEY! So that's what you look like.]
That the markets are stuck in a trading range is a concern. What I'm really getting worried about, though, is the increasingly toppish aspect of the trading range.
As a general rule, the longer a base or top formation exists the more spectacular the ensuing breakout, and my instinct here is that it is unlikely to be on the upside. Judging by the piles of loot CEO's have decided to leave on their balance sheets, the captains of industry agree, or are at the very least hedging their bets.
Sideways markets can last a long time, though. The Dow barely budged an inch during the whole of the 1970's, before finally busting out into a 20 year bull run, unique in market history.
At any rate, none of this bodes well for the architects of social security privatization.
On second thoughts, social security privatization bodes well for those wishing to prop up their overpriced equities portfolios with the sweat of the dumb masses.
So perhaps they'll do just fine.
-Mr. Shakes
past performance is not an indicator of future results
DW, thank you for providing this service, of explaining economic stuff (that's the technical term, right?) in a way that can be understood by even the most slack-jawed economic morons among us (i.e. me). I hope you know how really, truly appreciated it is. Even though I have a very wise and patient Mr. Shakes at my service, I don't need to bother him nearly as much with inane questions now. :)
LOL. We were leaving a comment at the same time?!
I sold my hair to buy him a watch chain....
Good afternoon, Shakespeare's Sister.
You sold your HAIR?!
And here I thought that my selling my blood plasma twice a week for the past couple of decades was a troubling personal economic indicator.
We have simply GOT to figure out how to generate revenue off this blog business.
The Dark Wraith writes to George Soros.
[Huh. Letter came back unopened. Someone wrote on the envelope, 'Return to sender: Your blog sucks.' Geez, Soros owns the Post office, too?!]
Good Afternoon DW,
Question-
Are there any kind of "boosts" that could significantly help our economy, outside of monetary/fiscal policy? And by boost, I mean "Barry Bonds steroids" boost. Would major technological advancements be enough to negate our shortcomings? I'm sure there are plenty of factors that could become a "boost", but which ones are actually possible?
Too many questions.
lowlyredstater
The CultureGhost patiently waits for updates on the Iran Scenario and the Plame Spy Scandal...he is feeling like The Spy Who Hasn't Come In From The Cold.
DW,
Thank you for doing this every day...I've learned more about economics in the last week than I ever did before just from reading your blog.
Ok, my question is what is the longterm impact of a decrease in durable goods, increased unemployment, and increase in oil. Those three seem to be a trifecta of bad news, and I'm wondering if you think this is a blurb, or an indication of a serious problem.
Thanks again!
John
Good evening, Lowly Red Stater.
To everyone, I must apologize for the delays in responding to all of your comments and questions. I had a heart-stopping couple of hours when The Dark Wraith Forums disappeared. I do not know what happened, but I am committed to getting this Website to a private server as soon as possible. Losing this accumulating body of knowledge we are providing here would be a small but awful event.
Now, Lowly Red Stater, to your question.
Even if there were a way to give an economy a quick-shot boost, it would not be a good idea. It would be the equivalent of finding a way to make a large airplane pull out of a spiral stall in one second: the structural integrity of the plane would be compromised, probably catastrophically, by the violent maneuver.
Recall that the Great Depression took years from which to recover, despite a massive overhaul of the federal government. Truth be told, World War II, debilitating and rather long as it was, likely played no small part in completing the restructuring of the government, the people, and the society into its modern, more economically robust form that we have known since.
Those dramatic rites of passage have been seen at other times in history, too. By the 14th Century, Europe was mired in a terrible economic state. The Enclosure Movement, as well as other economic and social changes, were transforming the Western world into a miserable place for many people.
It is no coincidence that the Black Plague then came. In its awful slaughter, millions and millions of souls lost their lives, particularly the weak, the infirmed, the elderly, and the marginalized.
When the Plague's melancholy rage had passed, though, the seeds of a new world began their dramatic ascent into the Renaissance. Without so many people, food was relatively abundant, certainly more so than it had been in more than a century. It is no coincidence that the end of the Plague was attended by such things even as fashion: people began to wear more form-fitting, less somber clothing. Small pockets of dramatically new art culture emerged and, over the next century-and-a-half, would spread far and wide. Even the Medieval Church became surprisingly volatile and capricious in its persecutions of heresies, allowing a few ascetics to live out long and productive lives (Julian of Norwich is a stunning example).
But all of this happened over a long period of time, which was the way of the world in that era. We now become impatient when the economy turns downward for a few quarters, whereas, in other ages, depressions could be measured in decades and centuries.
We have learned an extraordinary amount about how to smooth out the business cycles; but more importantly, we have learned so much about how to compress those cycles. That was the triumph of Keynesian economics, which brought the behemoth of a nation-state to bear upon the problem of a faltering economy.
And no amount of hemming and hawing by radical Classical or neo-conservative economists can change the fact that history has shown the era before John Maynard Keynes to have been far more brutish than the world after him.
That doesn't mean we cannot do better; but we must wait for a time when the awful denial of progress—in science, in moderate economic and political theory and practice, and even in our understanding of God—has passed.
We can shorten the business cycle more; but the solutions do not lie in quick-fixes, misrepresentations about the reality of where we are, and false denials of the success of liberalism.
Patience, Lowly Red Stater. You'll have your chance to figure out some good ways to turn the economy around more quickly; but you'll have to wait until the ghosts of the miserable past have had their run and been shown to be the same utter failures they were throughout history.
Although, as it was in the years of the Plague, the toll in human suffering will be immeasurable, we can hope that the time afterward will be good for those who have survived.
The Dark Wraith has spoken.
Good evening, Culture Ghost.
I'm glad you're still haunting the old blog, here.
I am awaiting some information I have requested. My efforts may end up being frustrated; but if worse comes to worse, I might try to use a Freedom of Information Act request to get what I need.
The problem with that is rather obvious: if the documents don't exist, I won't get them. Othewise, I might get some kind of denial based upon national security or on-going investigation grounds, but such arguments would be specious. I have a feeling, though, that those arguments would ultimately be successful in keeping me from seeing the relatively innocuous things I want to see.
This is all to the end of getting some very simple information. As I noted in a private e-mail to another blogger, this might get me in hot water.
That means I may be forced to turn over this blog to all of you folks while I go into hiding for a few centuries.
Just make sure you feed the cat and keep the fern watered.
And keep Mr. Goat out of my stash of Spam.
The Dark Wraith looks over his shoulder.
And good evening to you, John. I am ever so glad you have finally started posting, here.
For those of you who don't know John, he is the blogger of blogenlust, which is in the Dark Wraith BlogRing.
Now, John, you are correct: orders for durable goods going down, unemployment failing to move to more moderate territory, and oil prices going up are a triple whammy.
An economy as large as that of the United States can sustain a surprising amount of beating and still stay pretty strong; but there's only so much it can take before infrastructural damage starts to set in.
The orders for durable goods is troubling because that means businesses are looking ahead with great caution, and that can become a self-fulfilling defeatism. If businesses plan too cautiously, the businesses that provide for those businesses begin to suffer, which causes job losses, which leads to less demand for goods and services, which confirms for the original businesses their cautious forward planning.
Sadly, the unemployment rate seems to stay stuck above five percent these days; and that's the official unemployment rate, which doesn't count underemployment, misemployment, and discouraged workers. No matter how much gravy the White House and the news media pour on little dips in that unemployment rate, the fact that even their data massagers can't get it down below five percent is nothing less than spanking proof that George W. Bush and his radical neo-conservative policy wonks can't hold a candle to the brilliant policy managers of the Clinton Administration, who were able to hold unemployment down at levels we didn't think were possible without setting off an inflation spiral.
But Clinton's people did it. And more importantly, George Bush's people can't.
If it weren't for the awful tragedy of so many out-of-work people, the irony of it all would be worth a hearty laugh.
Now, the rising energy prices is going to be a long-term and vexing problem for the American economy. In the end, those rising energy prices should begin to force the painful move to alternative sources of energy for everything from automobiles to residential heating and cooling. The problem is that the government could be a catalyst for, a financer of, and a strong partner in that transition; but it's not going to be, since that would be philosophically at odds with the way neo-cons and their fossilized intellectual ancestors, the Classical economists, thought that "free" markets would find the way to the future by the most efficient and cost effective means.
That, of course, is rubbish. In a world where there isn't even a hint of the "perfect competition" paradigm where "enlightened self-interest" would lead to effective innovation, we're not going to see a smooth, market-driven transition to alternative energy resources. Instead, we're going to lay waste to everything in our path to squeeze the last drops of oil out of the ground, we're going to pay more and more and more for those last drops of oil, and then, at the very last minute, we're going to deal with the transition in the most economically and socially painful ways we can, all because we had no leadership from the people whom we elected to provide exactly that: leadership to the future, not to some past that cannot be sustained, despite our misty-eyed nostalgia for gas-guzzling, monster cars and grotesquesly inefficient heating and cooling systems in our homes and offices.
I've said it before, and I'll say it again:
Pain is necessary;
suffering is entirely optional.
Unless something changes in the fundamental character of the American way of political/social culture, we are destined to choose the fanciest options package on our PainMobile to the future.
Welcome to The Dark Wraith Forums, John.
The Dark Wraith now heads to another thread to answer some questions.
Good evening Mr. Wraith,
Commenting on the economic news seems a bit useless...the voters who elected to bury their heads in the sand last fall will not hear if we say "I told ya so". Once again, the republican "optomism" of stuffing one's fingers in one's ears and singinging "La LA La, I can't hear you" has led us to this pass. I truly resent the fact that at 46, with two small boys, I am looking at a future that is gonna hold a doozy of a recession. Perhaps even a repeat of the Depression in a modern version, since the gov't has no funds to soften the landing when the birds of war and bad judgement come home to roost and by sheer weight bring the economy crashing to the ground.
On a lighter note, the title bar problem several of us reported yesterday is no more, so if you did anything other than simply return to the original, it worked, even using Opera.
The CultureGhost was perplexed by the passing mention of Philip Agee in one of The Dark Wraith's comments. His search through the internets (sic) yield recent interviews with Agee and data about his recent vocation/avocation(Promoting tourism in Cuba...how very,umm,er,interesting?)
Did Agee part company with the group documenting/exposing CIA ops?
A nagging particle of Uber-Conspiracy popped into existence (a cerebral quantum foam thing) while The CultureGhost was emptying litter boxes. Was Agee a Grand Subterfuge concocted in the early 70s and let loose as a deep penetration, yet so public, agent?
The CultureGhost weighs the sheer audacity of this concept against the many, many shortcomings of the CIA and sighs...we've never been so bold.
Then again, The CultureGhost revived a strange spirit, a haunted spectre of a man consumed by the presence of the unseen, when he invoked the name of James Angleton. A bold master stratagem of this sophistication would be worthy of the late Mr. Angleton.
Holy COW, Wild Clover! You mean this blog is actually showing up in Opera?!
Now, I know my coding skills are getting weird. Before you know it, I might actually be able to write code that works in Safari. (That's for Mac users, y'know.)
I do like your description of the people who vote these radicals back into power as acting like they're putting their fingers in their ears and hollering, "LA-LA-LA!" It's almost like they either don't want to understand the consequences of their actions, or they're deliberately trying to cause themselves some kind of suffering.
What scares me is that I've met people who seem to be in the latter category: it's almost as if they know they're doing something that's going to hurt everyone, including themselves; and that's why they're doing it. They seem to think that the only way they (and all of us) can return to grace is through some trial of bad times.
Sort of like baiting Apocalypse Lite.
Strange people.
Strange times.
The Dark Wraith could do with a little less strange.
Good evening, Culture Ghost.
I must note, before retiring for the evening, your mention of the late Mr. Angleton. He is not, of course, the only ghost haunting the dramas of the present day.
There are a couple of others—somewhat more alive—who might be having some fun on the new playing field.
And while we're at it, you might want to put in your hat the interesting fact that, last year, the Israelis finally released that poor and long-suffering chap, Mordechai Vanunu.
Now, for what crime did the Israelis first capture him in international waters and then send him to prison for so long? And why, exactly, did they release him, given that they've rarely shown any use for statutory guidelines governing the lengths of internment for national security threats?
The Dark Wraith just sees so many things as more than the merely unrelated events that they honestly are.
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