The North Carolina General Assembly is considering major sales tax reform in the wake of the economic crisis and this is taking up most of my days. Consequently posting will may be light this week.


New Home Sales: We had a good 11% jump in June and I’ll borrow a few graphs from Calculated Risk rather than make my own.


New Home Sales and Recessions


The up turn is tiny but there are reasons to be cautiously optimistic

  • Most obviously, turning points have to start somewhere and this is not bad
  • Even an end to the decline in housing construction will be a boon to growth and employment, as housing has been subtracting from both for some time.
  • Lastly, the absolute level of inventories is relatively low

New Home Sales Inventory


and thus we could see rapidly falling months of supply as sales rise

New Home Months of Supply and Recessions

Months of supply is a key variable for home builders deciding to expand or shrink.

Jobless Recovery: The conventional wisdom is that this recession will see a jobless recovery similar to the last two. I’m not so sure. Right now its just a hunch but I want to break down the employment data by sector and see if that can tell me more. In short, jobless recovery’s of the past  may have resulted from recessions that were unusually white collar. This looks like a more typical blue collar recession and might produce a swifter turn around.

Of course, the consumer remains under pressure but I am still unclear how to weigh this. In theory it doesn’t necessarily matter because any combination of higher investment spending, higher government spending or lower net imports can make up for that.

Its fairly easy to tell a story about higher government spending and lower net imports. The investment story is a bit more complicated but not implausible.

Home Prices: Home prices for May were up and that is good news. We have been seeing a slowdown in the rate of home price decline for some time and so this is an expected part of the turn around process.

What makes it particularly welcome is that this data is two months old at this point. It contributes to what is increasingly looking like a consistent economic story. The economy began to bottom in April and by the end of July was poised for recovery. Which brings me to my last point.

Recession’s End:  I have been telling friends offline that I expect the last month of the recession to be July 2009. Though, I don’t have a hard forecast the storyline behind the data is strong enough for me to start saying it online.

A cursory look at the data suggests that under the best case scenario: employment will fall somewhere in the 200K range for July, be roughly flat for August and begin a modest (<50K) rise in September.

Just as a note, rising productivity means that the economy will turn positive before job growth turns positive.