While watching President Obama talk about the jobs on The View"”he should do more of that stuff, he's good at it"” my other eye was taking in all the commentary on Wednesday's durable goods report. The latest news on durable goods orders is not encouraging, not just because it shows a monthly decline for June when we were hoping for a slight increase but because it suggests we could be facing new headwinds on the employment front. Here's the short form of the durable goods news:
New orders for manufactured durable goods in June decreased $2.0 billion or 1.0 percent to $190.5 billion, the U.S. Census Bureau announced today. This was the second consecutive monthly decrease and followed a 0.8 percent May decrease. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders decreased 0.7 percent. Transportation equipment, down four of the last five months, had the largest decrease, $1.1 billion or 2.4 percent to $45.9 billion. This was due to non-defense aircraft and parts, which decreased $1.8 billion.
The negative report, which also told us that durable goods inventories are up, has import beyond the immediate news. As David Rosenberg at Gluskin Scheff points out, there is a tight correlation between durable goods orders and subsequent changes in employment. As the chart below shows, the jobs payoff--or cost--from a change in durable goods orders comes roughly four months later, and it's a respectable (as in 82%) correlation. The recent downward turn in orders may quickly reverse, but if it doesn't we could see the dark line (nonfarm payolls) take a turn for the worse.
Of course, not all economists see this as troubling, and many think the durable goods report was fairly positive given that 'core' orders (i.e., non defense capital goods, exculuding aircraft) were up slightly. But the chart shows the correlation with the total number, not the core number. By the way, if you want to enlarge this chart, just click on it.
Get e-mail updates from TIME's The Curious Capitalist in your inbox and never miss a day.
The Curious Capitalist Favorite Links Barry Ritholtz Brad DeLong Calculated Risk Econbrowser Econlog Ezra Klein Felix Salmon Floyd Norris Greg Mankiw Growthology James Pethokoukis John Gapper Justin Fox Marginal Revolution Mark Thoma Matt McAlister Megan McArdle Mike Moffatt Nicholas Carr Paul Kedrosky Paul Krugman Philip Coggan Planet Money Roger Parloff Ryan Avent Swampland The Stash adFactory.getCmAd(300, 250, "global", "tout").write(); adFactory.getCmAd(300, 100, "article", "tout").write(); ArchiveJuly 2010SMTWTFS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 More News from Our Partners CNN New phones are too big for pockets The KIN phone is dead -- 'buy now!' At $139, is the new Kindle 'cheap?' Huffington Post Obama Administration Pushing To Expand U.S. Arms Exports By Gutting Approval Process Wyly Brothers Gave Millions To Over 200 Republican Candidates SEC Accuses Sam And Charles Wyly, Billionaire Dallas Investors, Of Insider Trading Yielding $550 MILLION DailyFinance.com The High Risks of Picking Stocks Toyota to Recall 373,000 Avalons Goldman Sachs Bans Swearing in Emails Rotten Tomato Comic-Con Ketchup: Guillermo Del Toro to helm Haunted Mansion flick RT on DVD & Blu-Ray: Clash of the Titans and Repo Men Dude! It's the 15 Manliest Movies Ever! Life Space-Age Toy Cars, Planes, Trains Famous Artist Suicides Hubble Telescope: Greatest Hits More on TIME.com » The Plight of Afghan Women: A Disturbing Picture Iran War Rhetoric: A Self-Fulfilling Prophecy? The BP Spill: Has the Damage Been Exaggerated? Quotes of the Day » "I will definitely do it." SHIRLEY SHERROD, former Agriculture Department official, on whether she will pursue a lawsuit against conservative blogger Andrew Breitbart, who posted an edited video clip of Sherrod appearing to say she discriminated against a white farmer More Quotes » var ad = adFactory.getAd(88, 31); ad.setPosition(13) ad.write(); Today in Pictures » Must Have Item Stay Connected with TIME.com Learn More » Subscribe to RSS Feeds Sign Up for Newsletters Add TIME Widgets Read TIME Mobile on Your Phone Become a Fan of TIME Get TIME Twitter Updates adFactory.getCmAd(115, 42, "homepage", "tout").write(); © 2010 Time Inc. All rights reserved | Privacy Policy | RSS | Newsletter | TIME For Kids | LIFE.com Subscribe | Contact Us | Terms of Use | Media Kit | Reprints & Permissions | Opinion Leaders Panel | Help | Site Map TiiAdTrackRevSci(); function tiQuantcast() { } _qoptions={ qacct:"p-5dyPa639IrgIw", labels:tiQuantcast() } var _sf_async_config={uid:3088,domain:"time.com",pingServer:"ptimeinc.chartbeat.net"}; (function(){ function loadChartbeat() { window._sf_endpt=(new Date()).getTime(); var e = document.createElement('script'); e.setAttribute('language', 'javascript'); e.setAttribute('type', 'text/javascript'); e.setAttribute('src', (("https:" == document.location.protocol) ? "https://s3.amazonaws.com/" : "http://") + "static.chartbeat.com/js/chartbeat.js"); document.body.appendChild(e); } var oldonload = window.onload; window.onload = (typeof window.onload != 'function') ? loadChartbeat : function() { oldonload(); loadChartbeat(); }; })(); Powered by WordPress.com VIP var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-10268691-1"); pageTracker._trackPageview(); } catch(err) {} var _sf_async_config={uid:3088,domain:"curiouscapitalist.blogs.time.com",pingServer:"ptimeinc.chartbeat.net"}; (function(){ function loadChartbeat() { window._sf_endpt=(new Date()).getTime(); var e = document.createElement('script'); e.setAttribute('language', 'javascript'); e.setAttribute('type', 'text/javascript'); e.setAttribute('src', (("https:" == document.location.protocol) ? "https://s3.amazonaws.com/" : "http://") + "static.chartbeat.com/js/chartbeat.js"); document.body.appendChild(e); } var oldonload = window.onload; window.onload = (typeof window.onload != 'function') ? loadChartbeat : function() { oldonload(); loadChartbeat(); }; })(); _qoptions={qacct:'p-18-mFEk4J448M',labels:'language.en,vip.timecuriouscapitalist'}; try{COMSCORE.beacon({c1:2,c2:7518284});}catch(e){} st_go({'blog':'5320466','v':'wpcom','user_id':'0','post':'11205','subd':'timecuriouscapitalist'}); ex_go({'crypt':'RDZ8LFkxbXF2TVluJVFmT0xoZkVaUCVrM3R3cCU2Wi10dT9ta3VEZG89N3pwOFdMRVB3Rls4VHhUemlpOFY0W1V+X0prOW16LU5rfktuc29XPUtiMXlVUyY9aiszRzc2T3lKJnlXcEpSOTBkQVRYd3xWYVIvZEN+MV9fflpoNTlBSFk2aTRSUGRiUy1XWGFGK0pJU0xHUkFUX3BWWXFlWTBrOHF0My01ZkJxT1VYQm8ld01qQmZOZWxERm1TaDJaXSZ3NEpCfCZNR1ZxM2tkZiVJQldVZUItTllYbEQ='}); addLoadEvent(function(){linktracker_init('5320466',11205);}); Read Full Article »