David Rosenberg: Here's 9 Charts That Will Fool You Into Seeing A V-Shaped Recovery


In his morning note, Gluskin-Sheff’s David Rosenberg presents a series of jobs-related charts that look sunny on first blush, but which he claims are misleading. Sure they look like they’re v-shaped, but they will soon taper off:

Looking at the charts below (thanks to Josh Frankel, our long time friend and former Merrill Lynch colleague), one would think that, yes, we have a V-shaped recovery in the U.S.  But the reality is that the economic data in these charts,
especially the YoY comparisons, are about to hit some resistance in the months ahead.  Moreover, the leading indicators (ie, housing starts) are starting to sputter or have rolled over, and that is what really matters. 

The gist to think about as you scroll through the charts is that the comps are bound to get more difficult, and that underpinning factors of job improvement (housing, increased capacity utilization) are fizzling out.

Capacity utilization rate and the year-over-year change in nonfarm payrolls

'Correlation between the CapU rate and the YoY change in payrolls is very high, at
82% going back to 1967.'

Source: Gluskin-Sheff

'Moreover, in the last 20 years, the relationship between the two got stronger, at 90%, and looking at the last five years, the two series are almost perfectly correlated, at 96%. The YoY trend in payrolls will likely continue to rise because of the easy comps this time last year, which would suggest that the CapU rate will continue to rise for the next few months.'

Source: Gluskin-Sheff

Housing starts and the unemployment rate

'Historically, housing starts and the unemployment rate have a correlation of 27%; however, starts do lead the jobless rate by about a year (the historical correlation between the two increases to nearly 50%).'

Source: Gluskin-Sheff

'In the last 20 years, however, the relationship between these two metrics does increase to 69% and when housing starts is advanced by 12 months, the correlation increases to 80%. Moreover, similar to the relationship between CapU and the year-ago trend in payrolls, in the last five years, the correlation
increases some more, at 79%, and a 12-month lead in starts increases the correlation to over 90%.'

Source: Gluskin-Sheff

Temp Agency Employment versus Total Private Payrolls (excluding temp workers)

'The relationship between the two metrics is high -- correlation at 81%. And, as expected the temp agency employment leads by about six months (r = 93%).'

Source: Gluskin-Sheff

BONUS: A clear hard landing...

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