The Past Week

The Lehmann Letter (SM)

Two reports out this week illustrate the difficulty of the current economic recovery.

The Census Bureau reported (http://www.census.gov/const/newresconst.pdf) 685,000 housing starts in March. The chart below illustrates that this is a good jump above the trough of about half-a-million starts.

Housing Starts

(Click on chart to enlarge.)



Recessions shaded

But the strong relative increase cannot obscure how far we have to go. Any level below 1 million remains depressed. We are off the bottom; we're not out of the ditch.

The Federal Reserve's March data for capacity utilization tell a similar story:http://www.federalreserve.gov/releases/g17/Current/default.htm . Capacity utilization reveals how much industry is producing as a percentage of the maximum it could produce. Industry operated at 73.2% of capacity in March. Once again the chart shows that we've cleared the bottom.

Capacity Utilization

(Click on chart to enlarge.)



Recessions shaded

But the chart also shows that any figure below 75% is weak. We have a ways to go before the recovery shows strength.

These figures, and others, illustrate that the recession is over because the economy has stopped shrinking. Even the unemployment rate has begun to drop. But these observations only illustrate that we've stopped falling. They do not yet speak of a robust rebound.

(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2010 Michael B. Lehmann