Steven Hansen's  Instablog

Two points this week:

1. I do not understand the focus on initial unemployment claims. If they stay under 400,000 - there is little to no correlation to the jobs gain for the month. The data wobbles in any event, and is seasonally adjusted. I have no issues with the seasonal adjusting methodology of the DOL - but it still is a guess. I would only worry if claims went over 400,000.
2. There is a general softness in the coincident data but nothing to raise a lot of concern. What I am concerned about is the strengthening of the dollar which is already effecting exports. This is one reason industrial production is soft. I know of no economic forecast that adjusts for currency variations.

The Econintersect economic forecast for May 2012 declined marginally, but remains in a zone which says the economy is beginning to grow normally. There are some warning signs that our interpretation is not correct - but we will see how these play out in the coming months.

The ECRI WLI growth index value has been weakly in positive territory for over four months - but in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

Current ECRI WLI Growth Index

/images/z weekly_indexes.PNG

Initial unemployment claims rose from 323,000 (reported last week) to 360,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate (background here and here).

The real gauge - the 4 week moving average - modestly degraded from 336,750 (reported last week) to 339,250. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line)

(click to enlarge)

/images/z unemployment.PNG

Bankruptcies this Week: SBM Certificate, Skinny Nutritional

Data released this week which contained economically intuitive components (forward looking) were:

• Rail movements are beginning to show a modest growth trend.

All other data released this week either does not have enough historical correlation to the economy to be considered intuitive, or is simply a coincident indicator to the economy.

Weekly Economic Release Scorecard:

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Another week has passed and another week Mr. Market has risen. I always worry about long periods of price growth. But I continue to remind myself that there are many reasons for growth - outside of the areas I monitor.

The big warning sign for me is wholesale sales which is contracting in real and current dollars year-over-year. I see no other contraction - so one would conclude that the middle-man is being cut out. Just one more new normal condition.

The Econintersect economic forecast for May 2012 declined marginally, but remains in a zone which says the economy is beginning to grow normally. There are some warning signs that our interpretation is not correct - but we will see how these play out in the coming months.

The ECRI WLI growth index value has been weakly in positive territory for over four months - but in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

/images/z weekly_indexes.PNG

Initial unemployment claims fell from 324,000 (reported last week) to 323,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate (background here and here).

The real gauge - the 4 week moving average - modestly improved from 342,250 (reported last week) to 336,750. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

(click to enlarge)

/images/z unemployment.PNG

Bankruptcies this Week: SBM Certificate, Skinny Nutritional

Data released this week which contained economically intuitive components (forward looking) were:

• Rail movements remain mixed.

All other data released this week either does not have enough historical correlation to the economy to be considered intuitive, or is simply a coincident indicator to the economy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Hopefully the economy is passing through a "lull" stage. The leading indicators are showing smooth sailing. Why is the coincident data not matching the leading indicators? Why are the markets rising.

Not trying to be the "bad object" in the punch bowl - but a major portion of the leading indicators use the vision of the markets for guidance. There is a possibility we are in an unusual situation where the markets are wrong.

The trade data this week was terrible. Trade data is good at forecasting retail sales months from now, and is telling us the globe may be sliding into a recession. Manufacturing is contracting year-to-date (versus last year). Either the leading indicators are wrong, or the coincident data is wrong. It is times like these that I like to get out and stand on the sidelines to watch.

The Econintersect economic forecast for May 2012 declined marginally, but remains in a zone which says the economy is beginning to grow normally. There are some warning signs that our interpretation is not correct - but we will see how these play out in the coming months.

The ECRI WLI growth index value has been weakly in positive territory for over four months - but in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

Initial unemployment claims fell from 339,000 (reported last week) to 324,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate (background here and here).

The real gauge - the 4 week moving average - slightly improved from 357,500 (reported last week) to 342,250. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

(click to enlarge)

Bankruptcies this Week: Newland International Properties (dba Trump Ocean Club), PMI Group, CPI, [from last week: Yarway, Synagro Technologies, KIT digital]

Data released this week which contained economically intuitive components (forward looking) were:

• Rail movements remain mixed.
• Trade data (imports) is forecasting a slowing economy.

All other data released this week either does not have enough historical correlation to the economy to be considered intuitive, or is simply a coincident indicator to the economy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.