Perhaps the last nail of the recession’s end has appeared. Earlier today the BLS released the march data for payroll employment and the unemployment rate. The data released showed that jobs grew by less than the market and experts expected. The Unemployment Rate remained unchanged. Many took the BLS report as disappointing. However this analyst couldn’t be more thrilled with the release. Here is why.

In my previous posts I covered when the economy turned as well as why we could not conclusively say the recession was over. The primary pillar that had not materialized was positive job growth. The data indicated a trend of smaller and smaller losses, but we had not crossed into positive gains. In March, the last pillar of a recovery appeared, that of positive job growth. Looking deeper in the numbers, if you exclude the impact of temporary hiring of workers for the 2010 census and the rebound from February’s snow related shut downs in the mid Atlantic belt, you still see a net gain in the number of jobs from the payroll data. If we can keep in positive job growth territory, albeit at a low level, we have a real chance of a sustained recovery.

The Unemployment Rate remained unchanged and is likely to be somewhat “sticky” in response to job gains. As in March, there is likely to be influxes to the labor force (those counted as “actively looking for work”) from groups that previously exited it due to discouragement, to pursue education and retraining, and movement from full-time to part-time, etc. Look for the Unemployment rate to remain stubbornly high.

I believe there is also another significant factor at play in this economic business cycle swing. Many of those that lost their jobs, lost them because of the weakness of demand in the economy. Thus, most of them were cyclically unemployed. However, this time more than any in our history, many of the jobs lost will never come back. The new jobs will be for different skills. Hence a large number of people, having become unemployed from cyclical forces, will now be structurally unemployed. This situation creates significant impacts which calls for different expectations and solutions than previous recoveries called for. I will cover this more in an upcoming post.

Again, from this analysts view, April 2, 2010 was indeed a Good Friday for the US Economy.

The BLS reported today that the Unemployment rate held steady in February at 9.7 percent and that 36,000 jobs were lost in the month. The good news is that the job losses continue to get smaller and are almost zero give the scale of employment.

The bad news is that the country is still loosing jobs. The number of unemployed continue to rise and the number of discouraged workers (which are not counted in the unemployed or unemployment rate) rose by another 139,000 individuals.

The employment and unemployment situation has not turned around yet. And as I indicated in a prior post, The Recession is Probably Over, But The Fat Lady Hasnt Sung Yet., the recession hasn’t been determined to be over. Without a change in the job situation from negative to positive, the likelihood of really ending the recession and maintaining a recovery, however slow, is quite questionable.

Many of the significant provisions of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 take effect today. It bans or regulates some of the most contested practices of credit card issuers.

Since the passage of the CARD act last May, credit card issuers have been busy making changes to existing and new credit card agreements. Consumers have seen their credit limits reduced, their APRs and fees increased, annual fees instituted or raised, and the appearance of non-activity fees. Offers for Fixed APR cards have virtually disappeared in the last year. All in all, it looks like a lot of consumer pain from the legislation which was supposed to help them. In the short term, there will be increased pain for some.

Longer term is another story. There are lots of gains to consumers.

Credit card issuers have to set the due date to be the same day each month and give users at a statement at least 21 days in advance of the due date. With a stable set due date each month, more people are expected to be able to plan, schedule, and make their payments on time. Impact a significant reduction in late fees caused by ever changing due dates and varying billing cycle lengths.

For purchases already made, card issuers cant raise the rate on that balance if you keep making payments on time. Future purchases yes, but not existing balances. A payment needs to be 60 days late in most cases to raise someones APR (exception – variable rates cards varying with market interest rate changes.)

The practice of applying payments to the lowest APR balance on a card with balances at different APR rates is now regulated such that anything over the minimum payment must first be applied to the highest APR balance first. Industry practice was to apply it to the lowest APR balance first. This is a definite win for consumers carrying such balances.

The practice of applying rate increases to last months billing cycle as well as the current one by using average daily balances over two months (known as double-cycle billing is prohibited.

Unless you agree to the service from the credit card issuer, they can not charge you an over the limit fee. This has been a significant expense for consumers. Yes, they will stop the transaction from going through, but you wont get hit with these fees.

Speaking of fees, issuers can no longer charge you extra based on how you pay your bill (unless you requested expedited processing or use an actual person of theirs such as their customer service to assist in making the payment.)

Issuers also cant raise the rate on a card of a new account in the first year except:

1) When there is a special promotional period (like 6 months) that is shorter and then expires (which you knew about when you signed up.)

2) When the APR on the card is variable and tied to an interest rate index that rises.

3) When you are more than 60 days late on a payment (But it must be restored back to the original rate if you make your payments on time for 6 months. So the ooops I made one mistake on getting a payment out will not result in skyrocketed rates for evermore.)

The bottom line is that the interest rate you experience in this time period will probably be the one you expected. Again taking a surprise your rate is going up, way up. out of many consumers experiences.

Also, when an issuer is making a change to terms, fees, etc, they must give you 45 days notice with the option of opting out. Opting out is effectively closing the card. You still need to make your payments on time until the balance is gone, but the effective agreement is the terms you had before their proposed change. Here again, they are required to make up front disclose of a significant time period and the consumer has the choice to continue on new terms or not, without taking a hit on their current balances.

These are some of the more significant changes.

In the end, consumers have a clearer and more stable set of terms to do business with credit card issuers. More people are more likely to pay on time, with fewer fees, fewer surprises, and more options. Longer term, this is a significant improvement for consumers.

On Thursday, the Federal Reserve raised the Discount Rate by a quarter of a point to 0.75% effective Monday, February 22^nd. The Discount Rate is what is charged to banks for using the Feds emergency lending window. The target for the Federal Funds Rate was left unchanged at 0 to 0.25%, so the move is unlikely to affect consumer and commercial interest rates.

This can be seen as another small step on the road of returning to normalcy. The fed is continuing to slowly back off the aggressive assistance it provided the financial markets in the fall of 2008. Here the fed is encouraging banks to return to the private capital markets for their overnight borrowing needs by raising the rate the Fed charges. Already announced, the Fed will also return the borrowing window back to the normal overnight period, from its temporary 30 day period, in mid-March.

The Fed stated that this move should not be taken as a sign that their view of the economy had changed or that they were tightening the money supply.

Something is Missing Between the Buns.

The recession that began in December 2007, has not officially been declared over. The prior post, The Recession is Probably Over, But The Fat Lady Hasnt Sung Yet., dealt with who officially declares when a recession is over and the analysis that is used. It appears there are two major items that have not turned around: Real Income and Employment. Without positive gains in these areas, it is very hard to believe growth will be sustained.

For Real Income, the Business Cycle Dating Committee gives significant weight to Real Personal Income Less Transfer Payments. Both it and Real Personal Disposable Income were still declining in the third quarter.

But more troubling then Real Income, is the employment situation. As of December we were still shedding jobs on the whole. The size of the loss has been growing smaller so the trend is right. However, a loss is a loss and until we can sustain some job growth, one has to be skeptical that overall growth will endure.

Put together, the consumer based US economy will need to start creating net new jobs and this should lead to rising Real Income. With that, Real Consumption and RGDP have a chance of at least some sustained low growth. Until then, I wouldnt look for the BCDC to enter the stage lights and sing out, thus declaring an official end to the recession. In the meantime they are likely to acknowledge improvements elsewhere and reply Wheres the Jobs?

Last Friday, the Bureau of Economic Analysis (NBER) reported that Real Gross Domestic Product (RDGP) rose at a seasonally adjusted rate (SAR) of 5.7% in the fourth quarter of 2009 (3.4% of this was a change in real private inventories.) This followed a rise of 2.2 % in the third quarter. The general rule of thumb used by economists is that two consecutive quarters in a new direction signals a new phase in the business cycle. So the recession is over, right?

Well, maybe. The Business Cycle Dating Committee (BCDC) within the National Bureau of Economic Analysis has the official word on such matters. They dont use the two quarter rule of thumb. Rather the committee is looking for a widespread change in economic activity that often is reflected in RGDP. Their analysis, however, differs in a number of ways.

To begin with they are looking at monthly data and its chronology. Second, they look at a range of indicators, not just RGDP. GDP measures the product side of the economy. The committee also looks at the analogous income side of our economy. In particular, they examine Real Income minus Transfer Payments. At times these two sides differ in magnitude and change from previous periods. Other indicators the BCDC considers significant include employment, real manufacturing, wholesale and retail sales, as well as industrial production. Besides looking for a simple positive or negative rate of change, they are also examining the magnitude of the change in economic activity. It is often six to eighteen months past a turning point when the Dating Committee declares it as the official turning point. They want to leave no doubt of the change and exactly where it occurred.

As noted in a previous post, the Conference Boards Coincident Indicators (CI) index stopped declining in July. Since August, the CI and has had ever so slight growth month over month. This would set the stage for somewhere around August to have been the business cycle trough, the end of the recession and the beginning of the recovery.

The natural question that arises now is how do the series the BCDC is looking at compare to the quarterly RDGP changes? Are they in alignment or are there questions hanging yet?

It appears there is still some uncertainty. Some measures have not turned, turned long enough or strong enough. The remaining issues are particularly acute in Employment and Real Income. I will have more on this in an upcoming post.

On September 15^th, Federal Reserve Chairman Bernanke responded to a question at the Brookings Institute with the statement From a technical perspective, the recession was very likely over. Looking at the Conference Boards Leading and Coincident Economic Indicators, I would agree. Due to strict copyright control, I cannot display them here, but you are allowed to download the press release here with the graphs to follow the analysis yourself.

The Conference Boards Composite Leading Indicator (LI) Index is used to signal changes in the business cycle. One or two data points are not a reliable sign of a change. Rules of thumb here are three or more months in a new direction, or four of seven months in a new direction, signal a turn.

Looking at the press release, we see that the LI index turn down in August 2007 and did not rise again over the next five months, at which time the start of current recession was dated (December 2007). Similarly, the LI index turned up in April of 2009 and has risen for the past five months, indicating the business cycle is changing from contraction to expansion.

Reinforcing this signal of change is the Conference Boards Coincident Indicator (CI) index. The CI index signals where in the business cycle the economy is currently. Looking at press release, we see that the CI peaked in the Oct-Nov 2007 period and then started a long downward trend. In July of 2009, the CI turned up and August was flat, giving a signal that the economy has entered a flat or relatively little or no growth (or decline) phase. For higher confidence, we will need a third data point that is not declining here.

Taken together, the LI and CI signal that the summer of 2009 is likely to be the trough of the current business cycle and the later part of 2009 is likely to be an expansion. Note that these indicators do not say anything about strength of the expansion, nor how long it is likely to last, but only that we are likely to experience six to nine months of growth in real gross domestic product (RGDP).

If you are interested in how the LI and CI have performed over previous business cycles, you can download the technical notes that accompany the press release. At the bottom of this pdf are charts for LI and CI that cover the last 50 years. The shaded vertical sections are recession periods.