Post-Microrecession Blues In Trade and Jobs

We marked the end of the year-long microrecession in the United States yesterday, so today, we thought we'd check in on two of the lagging indicators of a nation's economic health: trade and jobs.

Our first chart shows how the year-over-year growth rate in the value of goods between the United States and China has been recorded by the U.S. Census Bureau for each month from January 1986 through July 2013. To account for changing currency exchange rates between the two nations, we have adjusted the values so that they are expressed in terms of the "receiving" nation's currency, with the growth rate of U.S. exports to China being based on the value of those goods expressed in yuan, and the growth rate of U.S. imports from China being based on the value of those goods expressed in U.S. dollars:

We find that both nations would appear to be have been experiencing sluggish rates of growth for the last several months. Looking just at July 2013, China's economy would appear to have fallen into recessionary territory for the third time since March 2013, as the pace of economic growth within that nation would not appear sufficient to increase its demand for the goods it imports from the U.S. Likewise, the pace at which the U.S. imports goods from China also indicates sluggish economic growth, although this month, it is in positive territory.

The sluggish growth rates observed in the past several months is not surprising given that the U.S. has only just exited a period of microrecession in August 2013, while China's economy has slowed to a very lackluster pace of growth. Since the decisions of what volume of goods to ship overseas is made many months in advance of their arrival at their destination nation's ports, which depends upon the business conditions observed at the time the decisions are made, what these growth rates are communicating are the economic conditions that existed in the respective nations several months ago.

Like international trade, jobs, as measured by the number of employed, also tend to lag behind real changes in the economy. The chart below shows how the number of employed Americans by select age groups has changed since the total number of employed Americans peaked in November 2007, just ahead of the so-called "Great Recession", through August 2013:

If you look at the data at the beginning of the Great Recession, we see that there was very little job loss at the very beginning, and no job loss outside of teens and young adults (Age 16-24) until April 2008, five months after the official start of the 2007 recession.

To take that lag effect for jobs into account, we'll use November 2012 as our start month for measuring changes in the number of employed in the U.S., since that would be five months after our dividend data first indicated the U.S. economy was experiencing recessionary conditions back in July 2012. We obtained the following figures for the net change in number of employed from November 2012 through August 2013 for each of the following age groups we regularly track:

• Teens (Age 16-19): -58,000 (from 4,468,000 in November 2012 to 4,410,000 in August 2013)


• Young Adults (Age 20-24): -52,000 (from 13,595,000 to 13,543,000)


• Adults (Age 25 and Older): +1,003,000 (from 125,214,000 to 126,217,000)

It seems the U.S. economy has been no country for young men, or women, for many months.

Still, with the microrecession just behind us, we would expect to see several more months of lackluster jobs numbers for young Americans before things really pick up as the recovery from the microrecession that ran from July 2012 through July 2013 gets underway.

Perhaps just in time for Christmas!

References

Board of Governors of the Federal Reserve System. China / U.S. Foreign Exchange Rate. G.5 Foreign Exchange Rates. Accessed 11 September 2013.

U.S. Bureau of Labor Statistics. Employment Situation Report Archive. Accessed 11 September 2013.

U.S. Census Bureau. Trade in Goods with China. Accessed 11 September 2013.

Dividends: U.S. Economy Now Out of Recession

According to the number of publicly-traded U.S. companies announcing cuts to their dividends, as of August 2013, the private sector of the U.S. economy has now fully exited the period of microrecession that it first entered in July 2012.

This new data confirms our call last month that the U.S. economy was exiting the recessionary conditions that had bogged it down since the third quarter of 2012.

Not uncoincidentally, this period of time also coincides with the Fed's latest quantitative easing programs. If not for the Fed's QE efforts, the U.S. economy would have experienced a full-fledged recession, rather than the more limited microrecession that it did.

Now that the U.S. economy is leaving those recessionary conditions behind, is it any wonder that the Federal Reserve is ready to begin trimming back the acquisitions of mortgage-backed securities and U.S. Treasuries that make up its current quantitative easing programs?

If you're looking for something fun to consider, try answering this question: If the Federal Reserve had not intervened to avoid the effects of a full-fledged recession in the U.S. economy in 2012, would President Obama ever have been re-elected?

References

Standard and Poor. Dividend Action Report. [Excel spreadsheet]. Accessed 10 September 2013.

The Dividend Recession

In June 2013, there were 20 public U.S. companies that announced that they would cut their dividend payments going forward. Unfortunately, that's double the level that indicates that the U.S. economy is experiencing recessionary conditions.

In the chart above, we see that the number of U.S. companies slashing their dividends first tipped over the "recession line" back in May 2012, before dipping back for a single month in July 2012, and then remaining steadily above the line ever since, with one four-month long period of extreme volatility.

The extreme volatility in the data running from December 2012 through March 2012 coincides with the so-called "fiscal cliff" tax crisis. Here, after U.S. companies raided the future to pay out extra large dividend payments before the end of 2012 to avoid the risk of having tax rates on dividends almost triple in 2013, many of these companies then announced that they would be cutting their future dividend payments in two separate waves - the first before the end of 2012, and the second before the end of the first quarter of 2013.

The Bureau of Economic Analysis will be releasing a major, mulit-year revision of the nation's GDP at the end of July 2013 - it will be interesting to see if any part of the period since May 2012 will be reclassified as having experienced the negative growth that corresponds to periods of outright recession.

China Back in Recession, U.S. Economy Sluggish

Now that we're well past the statistical anomalies associated with the timing of the Chinese New Year/Spring Festival holiday, the year-over-year growth rates of the value of trade between the U.S. and China indicates that China's economy has likely fallen back into recession, while the U.S. economy is growing, if sluggishly, through May 2013:

The data in the chart above has been adjusted to reflect what each nation's economy "sees" in terms of its own currency. For the most recent trends in the overall data, the value of the U.S. dollar has been falling steadily with respect to the value of the Chinese Yuan since May 2010, as the relative value of U.S. goods in China has fallen while the relative value of Chinese goods in the U.S. have become more expensive.

References

U.S. Census Bureau. Trade in Goods with China. Accessed 03 July 2013.

Board of Governors of the Federal Reserve System. China / U.S. Foreign Exchange Rate. G.5 Foreign Exchange Rates. Accessed 03 July 2013.