By Todd Sullivan of Value Plays

Yesterday I tweeted on the correlation between auto sales and recessions. The truth is we have never had a recession when auto sales are increasing. In fact, auto sales tend to begin falling 4-6months before a recession. See chart, shaded areas are recessions:

Capture392 624x386 Auto Sales & Employment....Better News Coming?

Further, when we see auto sales improving at double digit rates, it is easy to say the chance of recession is becoming more remote by the day.

Today Davidson runs the correlation between auto sales and employment. I think the questions he proposes on the chart is very valid, we may in fact be due for an acceleration in the household survey given the surge in auto sales and the fact it seems there is no pullback in sight for them for at least the next quarter. When $F and $GMare seeing the large YOY sales increases they are AND increasing production for Q1, that not only means more hiring and hours from them but throughout the whole auto supply chain.

“Davidson” submits:

The yesterday’s report of Auto&Lt Truck Sales rising to 13.6mil Seasonally Adjusted Annual Rate (SAAR) and this morning’s Household Survey Employment report rising by 278,000 to 140,580,000 employed is nothing but good news. Importantly, employment growth appears to be accelerating, but because no single or even a couple of months of data make a trend, we need to wait another 4mos or so to confirm this. The trends in the chart below are unmistakable. Yes they are up and they have not really wavered since 2yrs+ ago. The fears of recession should melt away as time passes and greater enthusiasm for the equity markets should develop.

I remain optimistic. You should remain optimistic. Equities remain an undervalued asset class in my opinion.

Capture391 611x420 Auto Sales & Employment....Better News Coming?