One of the big questions hanging over the economy and the financial markets is whether we’re about to enter, or are already in, a recession. Some call it a double-dip and liken it to the 1930s, which consisted of the Great Depression from 1929 to 1933 followed by a smaller recession in 1937 and 1938 caused by premature fiscal and monetary tightening. Economists assign a probability of 40 to 50 percent to a recession beginning late this year or early next year. While it looks like a toss-up, it helps to keep an eye on high-frequency indicators:
- Jobless claims plunged unexpectedly by 37,000 to 391,000 during the week ending September 24th. The phrase “too good to be true” comes to mind; this report could be a result of seasonal adjustment factors, but we’ll take it anyway. Click here for the press release from the Department of Labor.
- Rail carload traffic originated during the week ending September 24th rose 1.1 percent from the same week in 2010. Year-to-date traffic is up 1.7 percent from the same period last year. Intermodal traffic and ton-miles also are ahead of last year on a weekly and a year-to-date basis. Click here for the press release from the Association of American Railroads.
- The American Institute of Architect’s billings index rose to 51.4 in August after four consecutive months of decline. Readings above 50 indicate rising demand for design services, a leading indicator of construction spending nine to 12 months down the road. Click here for the AIA press release.
- Chain store sales dipped 0.2 percent for the week ending September 24th from the prior week but were 2.7 percent ahead of the same week last year according to the International Council of Shopping Centers. Gasoline prices higher than a year ago are partially to blame. Despite all the headwinds, consumers haven’t thrown in the towel just yet. Click here for the press release from ICSC.
- Box office receipts were up 33 percent during the week ending September 22nd compared with the prior week, led by Disney’s “The Lion King” in 3D. Year-to-date, however, sales are off 3.8 percent compared with the same period last year. Click here for some interesting stats from Box Office Mojo.
These indicators do not paint a picture of a strong recovery, but neither do they suggest an imminent descent into another recession. A near-term recession certainly is possible if conditions in Europe deteriorate further and bank lending seizes up. But… so far, so good.