Friday, September 18, 2009

New Orders Up Relative to Hiring = Economic Rebound

Reader GreenAB responds to my post on the Philadelphia Manufacturing survey:

Same odd picture like in the Empire Manufacturing Survey; New orders coming in nicely, but companies are not hiring, but even a slight increase in firing.
My reply:
In looking at the data, it looks like this has been a pretty typical pattern, especially coming out of recessions. New orders come back, but hiring is delayed until the economic rebound has been proven (hence why unemployment is a lagging indicator).
Here is what I was referring to...

Below are dates of the most recent recessions. Note when they ended and compare those dates to the chart below, which shows the difference between New Orders and Hiring per the Philly survey (I apologize in advance for the broad 10 year gaps... I'll work to tag the chart itself with those dates this weekend):
  • Recession of 1969-70
  • 1973 oil crisis; 1973–1974 stock market crash
  • 1980 recession
  • Early 1980's recession (Jul 1981–Nov 1982 )
  • Early 1990's recession (Jul 1990–Mar 1991 )
  • Early 2000's recession (Mar–Nov 2001 )
  • Current Recession

While I am not predicting smooth sailing (i.e. a massive economic rebound) ahead, it looks like the worst of this recession is behind us.

Source: Philly Fed


  1. How can you relate this to the uderlying credit conditions. Can the recession be over before financial assets have been fully market to market


  2. marking to market doesn't have a direct impact on output (it can however have a HUGE indirect impact).

    recessions measures the output of the economy. if financial assets are marked down, BUT income and output increase we can see a positive GDP print and declining wealth at the same time (though not likely).

    in addition, just that the recession may be over doesn't mean there can't be another shortly...

  3. Thanks, as you mentioned it will be more of a "print". Its hard to imagine that the bear market ended with PE ratios in the high teens, or the usual fire sales that mark a bottom