So Much For Optimism

Whoops. A couple of days ago I wrote that there were the first signs of the economy reaching the bottom of its decline. The data yesterday and today seem to indicate that the decline is still in full swing. So much for optimism.

New home sales are now at all time lows: an annual rate of a mere 309,000. Record keeping for this statistic started back in 1963, so we have plenty of recessionary data from the past to compare with. This decline is by far the worst.

Sales of durable goods, things that have a useful life of more than three years, have now fallen for six straight months. The drop was 5.2% in January alone. Up until this recession we had never had more than four consecutive monthly declines. Ever. That’s not encouraging.

The unemployment picture is equally bleak. First time claims for unemployment insurance jumped to 667,000 last week, up from 631,000 the previous week. First time claims are important to watch because they give us a measure of the number of newly unemployed people in the economy. This was the worst figure since 1982. And to cap things off: the number of people collecting unemployment insurance has now reached 5.1 million, the highest number since 1967 when records were first kept. There are an additional 1.4 million people collecting extended unemployment benefits, so the total is 6.5 million, way beyond any record so far.

This is all bleak. And with GM reporting a ridiculous loss of $9.6 billion in the fourth quarter of last year alone, it cannot be long before it has to start slashing its workforce. The New York Times report on GM is here: GM Struggles Continue .

Having said all this: those credit market spreads are still narrowing. So someone is feeling a bit better.

What’s the old cliche: darkest before the dawn?

Let’s hope so. Today’s stats sure are dark.