Strange week on Wall Street.
Weekly unadjusted initial unemployment claims popped above the 2010 year-ago number.
Yet the BLS jobs report this week (analysis here) was outstanding.
Was it caused by an unusual event in unemployment? Maybe, but the same uptick happened in 2008 – and the convergence began in the prior week. But hey – this is an economic recovery expansion right? As the BLS jobs data for April actually uses a mid month cutoff – whatever caused the spike in initial unemployment claims will not be in the current jobs data release. And the great BLS numbers released this week are subject to revision for several months.
But these were not the only bizarre data points this week.
- April ISM non-manufacturing was positive but far less good than a month ago.
- Productivity growth in 1Q2011 came in at a paltry 1.9% annual growth rate.
- The global investing world was a sea of red this week lead by the collapse of commodities.
This week Econintersect released its economic forecast for May 2011 anticipating a continuing flat growth rate. The question - Is the economy on the doorstep of another dip?
The fundamental economic real time building blocks are positive, and in some ways are gaining strength. The economy is not correcting when the transport of goods and materials to your local shopping center remains up YoY. Some transport data points are only a week old. Yes, some data points are not showing the same growth rate as they were earlier this year, but others are stronger. Overall a push.
The unsettling aspect of this week is the investing markets. There is a correlation between wealth and spending, and many are poorer as this week draws to a close. The economy has been “moderately” growing (Fed Chairman Bernanke’s words) – nothing has changed. It is the markets themselves which were growing at rates above the economic dynamics.
Sooner or later, the markets (stocks and commodities) correct to reflect a more considered forward view. The high end consumer is caught in this game of investing musical chairs, and as they are a major element in consumer “growth” – there might be another headwind to growth in the months to come.
But with any luck, the energy headwind might be abating. Econintersect remains positive for near term economic growth.
Economic News This Week:
Econintersect issued this week its economic forecast for May 2011 indicating a peaking of this current economic sub-cycle. In simple words, the same moderate recovery seen in March and April will continue in May.
This week the Weekly Leading Index (WLI) from ECRI declined from 7.5% to 6.7%. This level implies the business conditions six months from now will be approximately the same or slightly improved compared to today.
As discussed above, initial unemployment claims rose rather strongly in this week’s release. I suspect there might be an issue with the seasonal adjustment factors but only time will tell.
Weekly Economic Release Scorecard:
|April Jobs Report||Up||Jobs up a solid 244,000. Economic markers in the data are not excellent.|
|March Consumer Credit||Up||With smoke and mirrors consumer credit is up 0.06% YoY|
|Market Valuations||Doug Short and John Lounsbury review three market valuation indicators|
|Commodity Prices||Dirk Ehnts suggests Goldman Sachs may have been involved in the commodity price bubbles|
|Initial Unemployment Claims||Up||The seasonally and non-seasonally adjusted data tell the same bad story|
|1Q2011 Productivity||Up||Unusually small productivity growth|
|April ISM Non-Manufacturing||Less Good||This survey is not as bad as the pundits are making out|
|April ADP Employment||Up||Lower growth, and barely above labor force growth rates|
|Bush Tax Cuts||Elliott Morss overviews effects of eliminating some of the Bush Tax Cuts on deficit reduction|
|March Manufacturing||Up||Manufacturing new orders are in record territory|
|Student Loans||Malcolm Harris overviews the growing debt problem against the benefits of college education|
|April ISM Manufacturing||Less Good||The underlying survey results show manufacturing is growing|
|March Construction Spending||Up||Not Up – still falling YoY but at a slower rate|
|Global Empires||Elliott Morss looks at the role of education in maintaining empires|
|May 2011 Economic Forecast||Same economy as April|
|India||Sunil Chandra argues that the Reserve Bank should not be raising the prime rate|
|Real Estate Short Sales||Frank McKenna discusses short sale flipping fraud|
|Dollar as Reserve Currency||Michael Pettis looks at how the reserve currency has created global imbalances|
|BRICS and the dollar||Sanjeev Kulkarni opines on the BRIC conference outcome|
|MERS and Foreclosuregate||Michael Collins lists essential elements in the government settlements with the banking industry|
|Global Stock Markets||Erik McCurdy graphs the warning signals|
Bankruptcy This Week: Raser Technologies, Majestic Capital (fdba CRM Holdings) and Majestic USA Capital, Caribe Media and CII Acquisition Holdings
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.