wolfhounds (< 20)

Lagging Indicators

June 25, 2009 – Comments (2) | RELATED TICKERS: PAYX , RTH , SPY

My favorate posts are from anectodal evidence of the economy and jobs in the NYC metro area. I've lived and worked here all my life and have seen every recession since the early 70's. My posts, alas, don't contain charts or quotes from famous prognosticators, and are universally ignored by Fools. But maybe I'm not off base with economic reports of the last two days.

First, local stuff. It apprears the house price decline has finally hit the wealthy suburbs with the same ferocity as more well known areas. Putnam County down 31% y/y; Westchester and Rockland counties down almost 20% y/y. These are all counties with MTA trains into NYC and the corporate jobs in the White Plains area. I have written previously how accelerating unemployment was showing up in large declines in child care as well as increasing foreclosures.

Next, retail reports. BBBY reported a good quarter with net up 14%. Maybe I'm a bit unsatisfied with those numbers because Linens n' Things was not around and same store sales still declined 1.6%

Paychex reported a decline in quarterly earnings and issued a warning that fiscal 2010 revenue would decline 1-4%. Stock is down $1.75 pre-market. 

Nike likewise had decent quarter but reported that worldwide future orders will be down 12%.

You may have guessed that all three point to the fact that rising unemployment is causing retail to contract far more than "analysts" expected. And as unemployment continues to increase the tendency of consumers to hold back purchases in the future will also accelarate. It's not to difficult to ponder why - fear is a great motivator of behavior, and this behavior will be ingrained for some time. If you're a doubter, you're too young to be reading this.

Now to the "improved" GDP report. Final numbers showed a decline of 5.5%, better than the prior 6.3%. I wouldn't get too giddy yet. The sub-numbers indicate that consumer spending showed an increase of 1.4%, declining from 1.5%. Business inventories declined from 91.4B to 87.1B, and was a major component of the improved GDP number. Factories are simply producing less, and that is evidenced coincidentally by a 30.6% drop in exports, down fron the original 28.7%, which is the largest decline in 40 years.

So the world hasn't collapsed, and I didn't think it would with all the financial tools available to governments worldwide. But since I tend to tune out those experts who never collected an unemployment check or went shopping in their lives, I throw out the notion that there is light appearing at the end of the tunnel. This tunnel is still being dug.