Epain Homes

The following charts provide a simple comparison between the big stock bounce that occurred in the wake of the DOW crash of 1929 and the bounce we are seeing today in the S&P 500 index.

The method of alignment was simple… take the first definitive up trading day off the bottom of the preceding bear market low and set that as the start of the series… then simply re-base both series to a value of 100 so that they can be compared side-by-side.

The lower bar chart plots the cumulative percentage change since the start of each bounce.

The S&P 500 is up over 45% in a little over 160 trading days… an historically aggressive run with an obvious note of mania to it… and wholly comparable to… even far stronger than… the price movement seen in the 1930s-era DOW rally.

At this point for the 30s-era DOW, the bull-run was over as the bear trend resumed in earnest… today though the Bull is seriously on the move… how long will this boom last?

Only time will tell… But for now, let’s continue to keep a watchful eye…

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is on the rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that, on a year-over-year basis, household participation has increased a whopping 25.25% while individual participation, as a ratio of the overall population, has increased 22.83%.

The August results confirm that participation is continuing to climb dramatically, likely as a result of the recent jump in total unemployment, driving the nominal benefit costs up an astounding 62.61% on a year-over-year basis to $4,853,114,719 for the month.

Looking at the last chart that plots the total unemployment rate (unemployment rate of all traditionally unemployed workers plus all marginally attached and part time workers) and the population adjusted individual program participation rate normalized since 2005, one can plainly see that program participation would be expected to continue its surge.

Yesterday, CNBC’s Steve Liesman reported what he termed a potentially “calculus changing” event for the Friday’s employment situation report.

The latest ISM manufacturing employment index breached 50 indicating expansion in manufacturing employment and, as Steve noted, there have been very few instances where total nonfarm payrolls have declined (on either a month-to-moth or year-over-year comparison basis) during periods where the ISM manufacturing employment index is at or over 50.

This would appear to imply that Friday’s number could come in much stronger than anticipated.

Looking at the following chart, you can see quite clearly that Steve is right in his assertion.

The green vertical bars show instances where the ISM index is over 50 but the nonfarm payroll number declined on a year-over-year basis while the purple vertical bars highlight month-to-month instances.

One thing to note from the chart above though is that since 1985 the ISM’s manufacturing employment index has rarely been above 50 so the overall significance of an “ISM vs Employment Situation” mashup may be minimal… but still… the employment index appears to be indicating pretty strongly that manufacturing employment is expanding.

Again though, given the circumstances, it is more likely that manufacturing swung into expansion as a result of the cash for clunker “autos and homes” programs and resultant dynamics and not organic economic expansion.