The latest auto and employment numbers paint a picture of an economic recovery that remains tepid and potentially fragile.

September was the worst month for U.S. auto sales since February, down 23% from September 2008 and down 41% from the August 2009 outlier.

Many of us had wondered whether the cash-for-clunkers program would simply cause people who would have bought cars in September or October to buy instead in July and August. Now we seem to have an answer, though General Motors Sales Chief Mark LaNeve believes that low inventories also lost the industry 300,000 potential sales for September. If you average the three months of July, August, and September together, the impression is one of improvement since the terrible first quarter that's still left us below 2008:Q3. Inventory rebuilding should give a cyclical boost at some point,

Last week we received positive readings for some key economic indicators. But I still see plenty to worry about.

On Tuesday the Census Bureau announced that U.S. retail and food services sales in August were 2.7% higher than in July on a seasonally adjusted basis. True, 2/3 of the additional $9 billion in spending was attributed to motor vehicles and parts, and September car sales could be much worse than August. Another 1/6 of the new spending came from gasoline stations, and the higher average gasoline prices in August are hardly cause for celebration. But even excluding autos and gasoline, core retail sales were up 0.6% in August. Here's the summary from Stephen Stanley of RBS:

after a string of contractions, these data suggest that consumer demand is, at a minimum, stabilizing. Core retail sales may even

The Federal Reserve reported Friday that its index of industrial production fell another 0.5% in April, after having fallen 1.7% in March. Some analysts took comfort in the fact that at least the rate of decrease has slowed. But any decrease means we're producing less than we did the previous month, and recovery requires growth, not a slower rate of decline.

On the other hand, the levels for February and March were revised up from their earlier reported values, which is a positive development.

Those back revisions gave a boost the ADS Business Conditions Index. But I'm waiting for the backcast value of the index that is able to employ all 6 indicators (indicated by the leftmost vertical line in the second diagram below) to rise above

Here are links to perspectives from others on where the economy stands at the moment.

Rising delinquencies. Here's the assessment from Freddie Mac's 10-Q (hat tip to Calculated Risk):

We also observed a continued increase in market-reported delinquency rates for mortgages serviced by financial institutions, not only for subprime and Alt-A loans but also for prime loans, and we experienced an increase in delinquency rates for all product types during the first quarter of 2009. This delinquency data suggests that continuing home price declines and growing unemployment are significantly affecting behavior by a broader segment of mortgage borrowers.... Our loan loss severities, or the average amount of recognized losses per loan, also continued to increase in the first quarter of 2009, especially in the states of California, Florida, Nevada and Arizona, where home price declines have been more severe and where we have significant concentrations of mortgage loans with

Some good news, some bad, in the indicators we follow this week.

First, the bad news. Monthly sales for retail and food services, which had been up a bit in January and February, fell 1.1% on a seasonally adjusted basis between February and March, leaving the first quarter 8.8% below 2008:Q1. That's a particularly discouraging development, since given the cyclical behavior of the other components of GDP, it's hard to envision a recovery without an upswing in consumer spending.

On the other hand, new claims for unemployment compensation were reported today to have fallen by 53,000 in the week ending April 11, bringing the 4-week average down by 8,500 from what the revised numbers show to have been the recent peak the week before. If April 4 ultimately proves to be the peak for the