Comments on economics, mystery fiction, drama, and art.

Thursday, March 12, 2009

Today's news round-up

A mix of not-so-bad and not-so-good:

"Markets Heading Up for a 3rd Day"

"Retail Sales Drop Not as Bad as Feared "

"Initial Jobless Claims Increase Again "

"Net Worth of Families Declines Sharply"

"G.E.’s Debt Rating Is Cut by S.& P." That's General Electric, not General Motors.

"BMW and VW Reflect Difficulties Facing Carmakers"

That's all for now.

Monday, March 09, 2009

What's wrong with the employment numbers in the steel industry? I don't know, but I also don't believe them.

I commented in my previous post that I found the employment data for northwest Indiana, particularly in the steel industry, hard to believe. Here’s why.

American Iron and Steel Institute reports that steel shipments for the three most recent months for which data are available, and for the corresponding three months one year earlier are:

…………………….....Shipments (tons)

Clearly, steel production has declined precipitously just in the final two months of 2008, and is down more than 50% in December 2008 compared with December 2007. For the week ended February 28, the Chicago/Northwest Indiana region accounted for about 30% of the US total of 980,000 tons; call it about 1.2 million tons per month at that rate. In late 2007, that implies a production level of around 2.4 million tons per month; in other words, the current output level is about half its level in the previous year.

But the reported employment numbers do not seem to bear any close relationship to these outout declines, either
locally or nationally. Nationally, employment in iron and steel mills fell from a monthly average (for October 2007 through January 2008) of 99,400 to 96,100, a decline of 3.3%. That’s hard enough to believe when shipments are down by more than 50% (December to December). But reported employment in northwest Indiana not only did not fall, it rose—from a monthly average of 16,950 to 17,125, up a little over 1% (but up an astonishing 3.5%, January 2008 to January 2009.

If those employment figures are accurate--and I frankly don't see how they can possibly be accurate, either nationally or locally, we should expect to see sharp declines in employment in iron and steel mills happening in the very near-term future. The declining production in autos, trucks, heavy equipment, and appliances, and the continuing declines in construction make that all but certain.

Saturday, March 07, 2009

The recession certainly isn't coming to a rapid end

What can we say about the employment report for February? Employment fell by another 650,000 jobs and the job loss for January was revised upward. We've lost a net of 4.4 million jobs since December 2007. The unemployment rate was 8.1% in February, and will certainly continue to rise. U6, which includes discouraged workers and involuntary part-time workers, as well as those classified as unemployed, was 14.8%.

For Indiana, employment in January is down 4% since January 2008, a larger percentage decline than for the US as a whole. This is not surprising, given that Indiana is relatively highly concentrates in manufacturing and especially in motor vehicles and steel. The declines in construction employment and in manufacturing employment both exceed 10% since January 2008. Statewide, the unemployment rate has soared to 9.9%, from 4.8% a year earlier.

In northwest Indiana, the unemployment rate is also 9.9%, up from 5.4% a year ago, and already above what my October 2008 forecast saw for the end of this year. The employment report, which I frankly do not believe, says employment in the Gary area has declined by only 1.7% since January 2008 (with construction down by 13%, an industry accounting for 6% of total employment and more than 50% of the decline in employment), and that employment in the steel industry is not only not down, but nearly 3% higher than a year ago. The rising unemployment is, according to the official nmbers, largely a result of a 1.5% growth in the labor force; again, I don't believe this.

So there's little that's cheerful, and much that's bleak. And, locally, the cheer is not something I can believe.

Keynes quote of the day:

“The game of professional investment is intolerably boring and over-exacting to anyone who is entirely exempt from the gambling instinct; whilst he who has it must pay to this propensity the appropriate toll.”

From Matt Yglesias, who adds: "Except this time around we’re all paying the toll."

Tuesday, March 03, 2009

The monthly auto sales report

Auto sales in January continued to tank.

GM:...........Down 53%.
Ford:.........Down 48%.
Chrysler:...Down 44%.
Toyota:......Down 40%
Honda:......Down 38%
Nissan:......Down 37%

And this was with even larger-than-usual incentives. The steel industry will suffer from this, as will the parts manufacturers. Things in the Modwest get bleaker.

UPDATE: Great charts and comments from James Hamilton at Econbrowser.