The weekly initial unemployment claims data release this week continued to show elevated levels. Historically, claims exceeding 400,000 per week yields employment gains less than the workforce growth (click to enlarge images):
Some are using unemployment claims as a litmus test for the economy.
One could argue on the basis of the above graph that there is a general correlation between between initial unemployment claims and GDP – and that if initial unemployment claims remain at current higher levels through the end of this month, GDP growth in 2Q2011 will be lower than the 1Q2011 1.8%.
Should this occur there will be serious impacts for U.S. equity investors, especially if China and India keep tightening to try to control inflation in those countries. Further dithering in Europe over how to resolve the debt crisis there will just add some frosting to this very untasty cake.
There is no question the recent economic data is not as good as it was a few months ago.
This week a mostly ignored employment index was issued by The Conference Board showing a decline in employment dynamics.
This was the second month in a row of decline for this Conference Board index. Back-to-back monthly declines in this index are not uncommon.
Econintersect currently does not see any underlying trends in its own employment index which indicate the poor employment data is much more than an economic soft spot. But this soft spot is coming at time when the economy remains on life support, and there are growing headwinds from government budget cutting and lower global economic growth.
Even a small bump could derail this weak economy.
Economic News This Week:
Econintersect’s economic forecast for June 2011 indicates growth in June will be less good.
This week the Weekly Leading Index (WLI) from ECRI declined from 4.9% to 4.1%. This level implies the business conditions six months from now will be approximately the same compared to today. This index is eroding and clearly in a downtrend. If the current trend line holds, this index will be in negative territory in 2 months.
We are continuing to see terrible April and May 2011 data. Econintersect’s previous economic forecasts predicted an economy at cycle peaks. The data being released continues to indicate we are on the downside of cycle peaks – with the cycle peak likely being in March, or possibly April 2011. The data is less good, but not contracting.
Weekly Economic Release Scorecard:
|Democracy Manifesto||Frank Li shares his ideas to making democracy work in the USA|
|May Exim Prices||Import prices are up 12.5% YoY – Export Prices are up 9%|
|April Wholesale Sales||Up||Wholesale sales appears stronger than manufacturing and retail???|
|April Trade Balance||Improved||Small improvement may be result of a slowing USA Economy|
|Economic Surveys||Menzie Chinn walks through WSJ and Philly Fed Economist’s surveys|
|May Diesel Use||Down||Ceridan-UCLA says the economy is slowing down|
|April JOLTS||Did JOLTS forewarn of May’s bad employment data?|
|May Railroad Traffic||Indicates economy did not grow|
|April Consumer Credit||Consumer Credit contraction may have ended|
|Oil Price Manipulation||James Hamilton reviews the ongoing CFTC action against Nicholas Wildgoose and James Dyer|
|Consumer Metrics||Rick Davis reviews the CMI index|
|US & European Debt||Andrew Butter suggests Greece could bust the ECB|
|Global Wine Production||Elliott Morss details current global wine imports and exports|
|China||Michael Pettis overviews the current debt crisis|
|India & Pakistan||Ajay Shah looks at freedom of speech in India & Pakistan|
|Euro Crisis||Elliott Morss makes some predictions on the PIIGS debt crisis|
|Cost to Educate||Rick Davis says education cost and associated student debt may be limiting economic growth|
|Renminbi||Michael Pettis suggests RMB use in strength is fueled by speculation|
|Housing||Michael David White discusses whether current housing crisis is worse than the Great Depression|
|Tiananmen Square||Frank Li describes China’s journey 22 years after the infamous Tiamamen Square episode|
|American Middle Class||Robert Reich claims America’s challenge is to restore the middle class|
|Critical Analysis in Viewing Reports||Robert Huebscher shows how an annuity research report went bad|
|NYSE Margin Debt||Doug Short shows margin debt growth is a warning|
|Investor Sentiment||Guy Lerner charts out the market position|
|Stock Charts||Erik McCurdy explains medium term equities outlook|
|European Investing||MacroTides looks at the current pitfalls of European Investing|
|Economic Tipping Point||Jeff Miller focuses on what is important|
Bankruptcy This Week: (none)
Bank Failures This Week: (none)
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.