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Cramer: The Recession Is Over, but Hiring Comes Later

The recession ended a few months ago but you can't expect companies, even within a year after firing people, to bring them back on just yet.
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We want badly to relate the end of a recession to hiring, but unfortunately for the millions of people who are unemployed, it doesn't work that way.

That disconnect is particularly problematic in this recession, with a proximate cause of a total shutdown of the credit markets. Many companies, in order to assure that they had access to the credit markets, had to fire people to show they had the cash flow necessary to get loans.

You can't expect companies, even within a year after firing people, to bring them back on. In fact, the only companies I have seen take that action are companies that furloughed people specifically to bring them back when things got better, a policy that was not widespread.

In other words, you won't see the hiring until well after the recession is over.

So, what has made me so certain that the recession ended a few months ago? I look at a host of indicators, including overtime, inventories and credit availability, all of which coalesced to call a bottom at the beginning of the year.

Each one has its own powerful signal. Right before the economy switches from contraction to expansion companies begin to stretch their workforces. They don't want to start hiring for fear that the orders they are starting to see are simple re-stockings. In other words, they are concerned that their customers have so little left on their shelves or showrooms that they just


to place orders. You don't want to rehire to meet those orders because you may have to fire again once the re-stocking is finished.

That's why I monitor inventories so closely because, like the managers of the suppliers, I don't want to be fooled either. For example, one of the great debates that raged at the end of the year was whether the semiconductor companies, which had seen a pick-up in orders, were simply addressing these restocking needs. Once it was clear they weren't, and that business had gotten stronger and stayed stronger, you recognized that the end of the recession had neared.

To monitor inventory, I listen to the conference calls of

United Parcel Service

(UPS) - Get United Parcel Service, Inc. Class B Report


Federal Express

(FDX) - Get FedEx Corporation Report

and the railroads -- and I look at aggregate railcar loadings. They are about as reliable as you can get, and late last year they stopped decreasing and then started creeping back up, a classic sign of the end of a recession. Now they are roaring in double-digits, confirmation of the recession's end.

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One other excellent report, the ISM monthly purchasing managers' numbers also aided in calling the bottom in the economy in almost real time, again because it measures the supply chain, all part of the inventory puzzle.

Other good indicators that the recovery is accelerating include state surveys of business activity such as the

Maryland Survey of Business Activity

and the

Carolinas Survey of Business Activity.

Typically, I would not be as concerned with credit availability as an indicator but this time, given that this recession revolved around a dramatic reduction in credit, it would be a mistake not to key in on that.

Given the losses that banks had and the contraction in the sheer number of lenders, you had to use two sources to obtain this information:

Federal Reserve

reports ranging from the monthly Beige Book to the individual email backgrounders put out by the regional banks and the conference calls from the big national and regional banks.

The Federal Reserve did much to ensure that there was credit flowing throughout this period, but it was only when the losses peaked in the final quarter of last year, that you recognized the bottom was nigh.

I know, hardly a science. More of a pastiche that gives you enough confidence to say "it's over." And that's just what the mosaic I work with did in the first quarter of 2010.

At the time of publication, Cramer was long UPS


Jim Cramer, co-founder and chairman of, writes daily market commentary for's RealMoney and runs the charitable trust portfolio,

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. He also participates in video segments on TV and serves as host of CNBC's "Mad Money" television program.

Mr. Cramer graduated magna cum laude from Harvard College, where he was president of The Harvard Crimson. He worked as a journalist at the Tallahassee Democrat and the Los Angeles Herald Examiner, covering everything from sports to homicide before moving to New York to help start American Lawyer magazine. After a three-year stint, Mr. Cramer entered Harvard Law School and received his J.D. in 1984. Instead of practicing law, however, he joined Goldman Sachs, where he worked in sales and trading. In 1987, he left Goldman to start his own hedge fund. While he worked at his fund, Mr. Cramer helped start Smart Money for Dow Jones and then, in 1996, he co-founded, of which he is chairman and where he has served as a columnist and contributor since. In 2000, Mr. Cramer retired from active money management to embrace media full time, including radio and television.

Mr. Cramer is the author of "

Confessions of a Street Addict

," "You Got Screwed," "Jim Cramer's Real Money," "Jim Cramer's Mad Money," "Jim Cramer's Stay Mad for Life" and, most recently, "Jim Cramer's Getting Back to Even." He has written for Time magazine and New York magazine and has been featured on CBS' 60 Minutes, NBC's Nightly News with Brian Williams, Meet the Press, Today, The Tonight Show, Late Night and MSNBC's Morning Joe.