Yesterday I compared the state of the labor market as we know it now, in November 2006, to the state of the labor market as we knew it in November 2000, just before the onset of the 2001 recession. The point was that though things look pretty healthy today, that evidence should be taken with a good measure of caution.
Just to beat the point into the ground, here's a look at industrial production, through this past September:
Despite zero gain in August and a -0.6% drop in September, the 12-month growth in industrial production is still trending up. How did this index look in November 2000? Have a look:
Oh-oh. How about business fixed investment?
That looks pretty good, especially since many forecasts are counting on growth in this category of expenditure to stay solid as residential investment falters. Unfortunately, you might have said the same thing just before the last recession:
Same story if we consider what are interpreted as forward-looking measures of business activity. New orders now...
... new orders then:
Yesterday, Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, had this to say:
"I expect the economy to weather the recent challenges in the housing market,'' Pianalto said today at an event sponsored by the Pittsburgh Business Times. "I fully expect the economy to grow at a moderate, but sustainable pace.''
I'm in that camp too, and I have every intention of keeping the "moderate, but sustainable pace" fire burning. But every now and then its good to remember that we are still in the wilderness.