Jobless Claims, Transportation Numbers: Signs of an Economic Thaw?

On November 5, 2008, I posted “When Will the Recession End?” Using the Chicago Fed National Activity Index (CFNAI) I suggested that the recession might have started around December 2007. I then added the longest recession period (14 months), and concluded that Q1 2009 was prime time for a recovery. Subsequently, the NBER confirmed that the recession did indeed begin in December 2007 -so far so good for my ability to look backwards! However, if the recession is to end in the next three months we should begin to see an uptick in economic activity.

Last week the Chicago Fed released the CFNAI for November, the results are presented graphically below (recessions in red).

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The bad news is that the CFNAI-3 (3-month average) for November printed at -2.47 the lowest since the 1980’s and well below the -0.70 level that indicates a recession has begun. The good news is that this indicator tends to trough 1-3 months before a recession ends. The December CFNAI-3 (to be released January 26, 2009) must be higher than -2.47 for any hope of a first quarter end to the economic malaise.

Optimistically, there are two signs of spring on the economic landscape: an uptick in the Transportation Services Index and a decrease in initial jobless claims.

The Bureau of Transportation Statistics publishes the Transportation Services Index (TSI), the combined index measures both freight traffic and passenger traffic. While it may make sense to separate the two indexes, the combined index provides a better clue to the state of the economy. In fact, using simple regression we find more than 90% of the variation in GDP can be explained by the variation in the TSI. The combined TSI is presented below with R-squared.

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The high correlation and regression statistics suggest that the TSI is a very good indicator of future GDP. In fact the TSI has tended to trend up at least one month before GDP. On December 10, 2008, the combined TSI came in higher than the previous month. The freight index rose 1%, the passenger index fell -0.6% and the combined index increased 0.60%.

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Of course, it would be nice to see both the freight and the passenger indexes increase, but we must take what we can get in this environment. The next TSI report is scheduled for January 14, 2009 and another increase is needed before we can infer the beginning of an upward trend.

The second sign of spring for the economy is initial jobless claims, that was released on Wednesday (December 31, 2008). The consensus estimate was 575,000 initial jobless claims, however, the actual number came in well below that at 492,000. For the first time since the beginning of December jobless claims are below the four-week moving average.

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Once again, one point does not make a line and there is the strong possibility that holiday season hiring contributed to the drop in claims, but it is a glimmer of hope.

The first data of 2009 is the ISM index to be released on January 2, 2009. Positive movement in this index is one more pillar on which to build the economic recovery. The key indicators in the first month of 2009 will be transportation data (especially airlines), unemployment and jobless data, and finally anecdotal data such as the ISM.

Disclosures: None

Comments

[Niner:]

Another good article.........

No major claims of up or down. Just the presentation of some facts. And to paraphrase, one point does not make a trend. And the point was made we must wait for confirmation.


More! More!

Jan 01 08:49 AM

[User 143167:]

The initial jobless claims are down simply because last week was a holiday week and the office only opened for 4 working days.

Jan 01 09:36 AM

[Rob Viglione:]

Any glimmer of hope at this juncture is welcome. Whether or not the end of the recession is pending, what's more important for investors is that equities tend to begin their rally mid-way through the downturn. We may very well be reaching this point in the near future.

Jan 01 10:18 AM

[thecadean:]

Another idiot that either works for Wall Street, CNBC or the Bush Administration

Jan 01 06:10 PM

[aware:]

Don't believe anything these scumbags say.They are just trying to get people back into the market to be raped again.The people of this country have to take control.We can't trust goverment.It makes me sad to say this but I am ashamed to be an american.Stop spending ,only buy what you need.I say this because you hear all the bullshit that we are going to help main street,but yet they want to raise everything they can to help the same scum that put us in this situation.not you.

Jan 01 08:15 PM

[aware:]

Your right,they will try to trick you anyway they can,don't be sucker again.


On Jan 01 09:36 AM User 143167 wrote:

> The initial jobless claims are down simply because last week was
> a holiday week and the office only opened for 4 working days.

Jan 01 08:18 PM

[Kunst:]

Everyone keeps looking to history to figure out how this downturn will go. How many data points are working with here, maybe ten? All with different circumstances and from different times. There is nothing to say that this recession will follow any particular previous pattern, or that it can't break new ground that will be used for comparison when the next one comes. Better to look at the fundamentals, which are different than at least most of the previous downturns, and try to figure out how they will determine how this thing plays out. It's dangerous to steer while staring at the rear-view mirror.

Jan 02 02:32 AM

[Steven Hansen:]

take a real hard look at the TSI. do you note how flat it is since 2003. unless you a drinking koolaid, there is no good news in that observation.

the data is being spun. the down tick in unemployment happened during christmas week data gathering. wait til next week to see the adjustment. you cannot trend anyway based on data during christmas and new years weeks,

Jan 02 03:42 AM