The data continue to reflect a slow turn in the economy from a rapid decline to a slower downward pace. This period hits before the stabilization expected near mid year and the modest positive growth later in 2009.
Today's survey on non-manufacturing (read services) industries showed a lift similar to the ISM manufacturing index. Moreover, the new orders components which lead other key factors such as production and employment rose to 47 -- close to the 50 mark that differentiates negative from positive growth. Service new orders reached a low of 35 in November as manufacturing's hit a record low of 23 in December.
Monday's construction spending and pending home resales both showed gains. The first in a half year for construction spending (thanks to non-residential) as the back to back gains in pending home resales was the first since 2007. However, the inclusion of foreclosures in existing homes leaves the gains less conclusive.
Also on Monday the Fed released its quarterly report on bank lending. The key measure which indicates the degree banks are holding off borrowers fell to the lowest in over a year. While a large 40% of banks tightened commercial lending standards that's down a third since the January survey and off more than a half over the last half year.
The downturn in initial unemployment claims argues that employment layoffs have peaked. It also has a tight tie with the end of recessions. Over the last five recessions dating back to 1975 the average number of weeks from the claims peak to the recession end has been just five. Unfortunately, like the official statement declaring the start of the recession, the statement declaring the end will come long after we've seen it.
The slightly lower initial claims level in April than March sets up for another smaller decline in the all important employment report. I expect a payroll decline in the mid -500K range from the -650K+ range of the last four months. The payroll declines peaked in January and like the claims data suggest that the recession end may be near.
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