- “WASHINGTON (MarketWatch) — The output of the nation’s factories, mines and utilities rose a seasonally adjusted 0.6% in December, the sixth increase in a row following the worst downturn since the end of World War II, the Federal Reserve reported today. “
The glass half full crowd is pointing to the sixth straight month of rising industrial production as a sign of the economy’s health. Indeed it does point to a recovery.The question, especially given our prior post, is are we just recovering from a near depression level low recorded mid last year amidst the panic and rebuilding depleted inventories or are we at the start of an industrial production growth trend. Employment, credit, and consumption would lead us to believe the latter is the case but we are ever hopeful. U of Michigan’s Mark Perry at his blog Carpe Diem views things this way:
- “The monthly increase in December industrial production marks the first time since late 1997 of six consecutive monthly increases, and the cumulative gain of 4.5% through December is largest six-month gain since early 1998 (see top chart above). Although the year-to-year growth rate through December is negative (-2.0%), it’s the least negative growth rate since the summer of 2008 and the trend in this series, along with the six straight monthly increases, is another V-sign of economic recovery (see bottom chart above).”
A V-shaped recovery would be great but it would seem to be merely a hope without an increase in employment and consumer spending. The so-called jobless recovery which some portend is possible but can only go so far. A V-shaped recovery implies a swift return to prior activity levels and with twice as many people unemployed as in the prior state, it is difficult to see how that can occur. Remember, consistent with the prior post’s quotes from Goldman Sachs, what we have seen is a reduction in the number of the newly unemployed or a reduction in the rate of unemployment growth. What we need to see is actual employment growth. Also, employment growth simply meets population growth when we are adding 150,000 jobs to the economy per month. So we need to exceed that level to begin to put some of the millions of unemployed back to work.
