We are exactly 8 months in from the Dow bottom that everyone now refers to as the economic nadir of this recession and things are more convoluted than ever before, due to the worsening job situation. Today, we are building on our last look half a year into the recovery in the month of October, to give you a more time-pertinent look at the state of the economy.  The economy has truly reached a critical juncture, where the question is will the indicators flat-line and stop the robust recovery, or will they continue to improve and give us a very strong, quick recovery.  To answer this, the key questions must first be answered, how is the recovery holding up, will it continue, will it be jobless, and will it be widespread.

NOTE: Click on the graph to see a larger picture.

1. How is the recovery holding up? Even though the net change in payrolls continues to improve, and the Dow continues to increase, it is clear that the rate at which both of these indicators are increasing has slowed.  The Dow saw a down month in October, and is only up since 10/09/09 because of the strong week that just passed.  Meanwhile, other indicators are showing substantial weakening in the face of increasing impatience as consumers wait for true recovery.

2. Will the recovery continue? The answer to this question is far less certain than it was as recently as a month ago.  The fact that nearly every indicator has shown weak signs indicates that we may be in for more of a stable, but not strong period of economic uncertainty.  The reason for this, as can be seen by the graph below is that volatility continues to decline, indicating a lack of willingness to buy or sell, and consumer confidence has actually begun trending down.  The decrease in volatility makes the markets less receptive to good news, and the decrease in consumer confidence makes recovery in other areas much less certain.

3. Are we seeing a Jobless Recovery? The biggest question of the day. The reality is that the jobs situation is quite poor, as we saw Friday by the jobs numbers, and that it is possible that we are seeing a weaker job situation than expected.  This is primarily a result of unemployment’s innate role as a lagging indicator since companies only begin hiring after seeing substantial recovery in their own pockets. However, the situation at hand is in many respects worse than that of other recessions because people are very unwilling to hire, and unemployment is just increasing without a real check.  As we wrote last week, the problem is not the depth of the crisis but rather the breadth; the problem really lies in how excessively long it is taking for the job situation to show ANY sign of recovery.

4. Is the recovery widespread? Yes.  Despite the job problems, the recovery remains incredibly widespread. Although the amount of recovery varies substantially by the indicator one looks at substantive recovery is visible essentially across the board.  Just look at percent change amongst all economic indicators, and the substantive increases since March visible everywhere.