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Finally we're starting to see some convincing indications of economic recovery.
U.S. light vehicle sales in March were up 24% from the previous year, the first impressive year-over-year improvement in quite some time, and the best month we've seen since August 2008, if you don't count the cash-for-clunkers August of 2009 (and I don't). If you're looking for something to gripe about, you could still complain that March 2010 remains 21% below the level of March 2008 and 31% below March 2007. But I'll take what I can get.
Even with the U.S. gains, GM still sold more cars in China in March than in the U.S. Here's how the numbers look seasonally adjusted.
The Institute for Supply Management PMI manufacturing index also looked great, rising to 59.6 for March. This means that managers reporting improvements outnumbered those reporting declines by the highest margin seen since 2004. Improvements in PMI numbers are also being reported around the world; see the Wall Street Journal for a nice tabular summary.
And perhaps the biggest news was the March employment report from the BLS, whose establishment survey estimated that U.S. employment increased by 162,000 workers in March on a seasonally adjusted basis. I was surprised that Mark Thoma, Dave Altig, and Dean Baker found this disappointing. Certainly it was better than ADP's estimate that seasonally-adjusted private-sector employment had fallen by 23,000 in March, and received confirmation from the separate BLS household survey estimate that March employment grew by 264,000 workers, as well as from the 55.1 reading for the employment component of the ISM manufacturing report. True, 48,000 of the 162,000 new payroll jobs represented temporary Census positions. But those people are nevertheless now working rather than unemployed, and earning a salary with which they can buy goods and services or avoid bankruptcy and foreclosure. It's also true that another 40,000 of the March gain came from temporary help services, but that's often where employment growth first shows up. And I acknowledge that 162,000 isn't enough to bring the unemployment rate down, which remained stuck at 9.7% for March. Even so, this is enough better than what we've been seeing and than we could have seen that I personally am quite relieved. For a mix of the range of other optimistic and pessimistic takes on the employment numbers, see Phil Izzo's usual nice summary.
Or if you prefer a purely objective read, note that this was enough to lift the Aruoba-Diebold-Scotti Business Conditions Index most of the way out of negative territory.
Posted by James Hamilton at April 4, 2010 06:22 AM
Until China bubble break (Sep 2010 - Jun 2011) , things look good.
Posted by: Ivars at April 4, 2010 07:09 AM
These are good signs. I worry about the level of oil prices going forward. It would be interesting to hear from you on that.
Posted by: Steve Bannister at April 4, 2010 08:00 AM
In spite of all the good news, housing starts and mortgages still seem to be on the brink of "yuck" and "horrible". Then there is the steep increase in personal bankruptcies filed in March.
These two issues will haunt us for a bit I believe.
Posted by: Chris at April 4, 2010 08:07 AM
This is very good news. I am wondering if this will bring about a continued strenghtening of the U.S. Dollar which will bring down the prices of oil, gold, etc. That would have an effect on the stock market too.
Posted by: ed at April 4, 2010 09:34 AM
I fully support efforts by all parties to promote entrepreneurship and business activity in the United States. We should at the same time interpret business data within a reasonable context. Vehicle sales appear to be moderately improving, with net business sentiment positive since about December, and the free-fall in employment seems to have abated. We should balance these positive developments against a $1.4 Trillion Federal Fiscal deficit in 2009, $0.4 Trillion in current account deficit, and $1.2 Trillion in free liquidity supplied by the FED. In total, there was $3 Trillion of unsustainable stimulus injected in 2009 (28% of the civilian economy). It doesn't take a rocket scientist to realize that if it takes a 28% liquidity-inflation rate for the economy to essentially tread water, that the USA will be in for some tough times when these supports are no longer feasible. I am pleased however, that these stimuli have been managed to prevent a massive speculative bubble. I am displeased that regulatory management has perpetuated fictitious marking of distressed securities and has not tackled the (now sleeping) 1000 pound gorilla: an unregulated financial derivatives market.
Posted by: MarkS at April 4, 2010 09:51 AM
Mr. Hamilton,
Before you get to carried away in your cheering for the economy based on light vehicle sales, you may want to qualify that data, as opposed to simply quantifying it. The jump in light vehicle sales was predicted by automotive analysis Edmunds.com (~12 million SAAR for March) due to the large incentives given by the automotive makers, especially in response to Toyota trying to regain market share.
The problem going forward is that inventories are not high enough to justifying continuing the incentives over the long run--and it wouldn't be too profitable to step up production simply to continue the incentive program (this is about trying to gain market share with existing inventory that companies are already stuck with; and they are reluctant to step up the production process only to get stuck with a large inventory over hang).
Posted by: Brian at April 4, 2010 12:58 PM
Sorry, but growth is going to fall off during the 2nd half of 2010 and the next RE debt wave is coming in 2011. The chance of not getting a "NBER" recession is small.
Just to much private debt and little being done to combat that than massive borrowing for the invester class.
Posted by: The Rage at April 4, 2010 01:45 PM
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