Recovery, Recession, Or Depression ?: An Update

Nothing like economic "statistics" to clarify things.  Unfortunately, the numbers coming out of Washington are now so "massaged" that it's absolutely impossible for us mere mortals to understand what on Earth is going on with the economy.  Our first-hand experience is generally sending us messages that things still stink.  Yet, we are constantly told that things are improving and handed a slew of data supposedly proving it.

We posted a "Marko's Take" on this very topic in December (http://markostake.blogspot.com/2009/12/recovery-recession-or-depression.html) and were equally as confused as we are now.  Here we are 3 months later... and things continue to baffle.

Corporate earnings for the end of 2009 have been reported and they came in strongly.   Pretax profits increased 8% to a seasonally-adjusted $1.5 trillion annual rate in the fourth quarter from the third quarter, the Commerce Department said Friday, as well as slightly revising its estimate of fourth-quarter economic growth downward.

Gross Domestic Product (GDP) grew at a 5.6% inflation-adjusted annual rate.  The small adverse change of 0.3% stemmed from weaker than previously estimated business and residential investment, as construction spending declined.  Economists are currently projecting more modest growth for the first quarter, with most estimates around 2.8%.

The 8% quarterly increase in profits, which isn't adjusted for inflation, followed a 10.8% increase in the third quarter.  Profits were stimulated by an increase in output, as companies re-stocked inventories and non-existent growth in wages, which boosted profit margins.

The combination pushed fourth quarter pretax profits 30.6% higher than a year earlier — marking the biggest increase in 25 years.  For the full-year, however, 2009 profits were down 3.8% from 2008.

While conditions are clearly improving for companies, consumers still aren't yet confident in the economic recovery.  An index of consumer sentiment remained flat at 73.6 in March from the prior month, the University of Michigan and Reuters said Friday.  Clearly this reflects the joblessness of the recovery. 

Consumers' gauge of current conditions improved slightly, but their optimism about where the economy is headed declined.

While there is some good news to be sure, the bad news is quite troublesome.  The nation's money supply, as broadly measured, has now begun to contract on a year-over-year basis.  The falloff in real M3 since late-2009 is suggesting an imminent intensification of the extraordinarily protracted and deep economic contraction.

So, despite the apparent economic recovery, the ongoing pattern of job losses has yet to abate.  Of course, this may change with the Friday jobs report, but thus far, all the stimulus and spending has yet to create any uptick in employment.

Here's to hoping YOUR sentiment remains positive!

Marko's Take

Please visit our YouTube channel at http://www.youtube.com/markostaketv.  Our next episode on the legality of the Personal Income Tax will be posted within the next 48 hrs.