There are certainly some holes to be poked in today’s Case-Shiller data. With seasonal adjustments, May was still down from April.
But the uber-bear David Rosenberg is impressed, and in his note out to day, he says: “Now this is a Green Shoot!”
One by one, the shocks that the U.S. economy endured are being worked through (though there is one lingering impediment).
The sharpest part of the mean reversion in credit is probably over, but the credit
contraction still has a long way to go before household debt ratios head back to
anything remotely close to pre-bubble historical norms. This in turn suggests
that the trend towards frugality will persis.
Now we have the second shock — housing — subsiding. You couldn’t have
written a better script, a day after unsold new housing inventory plunges from
10.2 months’ supply to a three-year low of 8.8 MS, we see the Case-Shiller home
price index rise (0.45% sequentially) for the first time since the bubble burst in
May 2006 (note that in seasonally adjusted terms, prices still dipped 0.2%
mum) and 14 of the 20 cities eked out an increase. Stabilizing residential real
estate prices is absolutely an essential ingredient in transitioning out of the
recession, though inventories are still far too high to warrant a sustained upturn.
Bottoming is one thing, booming is quite another.
So what’s that third shock? Employment. That’s the Achilles heel of the whole thing, and right now nobody sees this getting better for a long time. If you think otherwise, we’d like to hear from you what industry is going to be hiring — on a scale that can replace the housing economy — anytime soon.
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