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Let's Not Get Carried Away With Friday's Personal Consumption / Income Data

My review of the Personal Consumption and Income data was glowing. There are reasons this data came in strong:

  1. Retail Employment gains were abnormally high for November. This would produce higher than normal income. This is holiday period employment - not permanent, and come December / January will evaporate with a higher than normal labor force contraction.
  2. Retailers have moved the holiday sales forward earlier in November. The hope is that with a longer period more sales are produced. We will see.

I wrote:

The growth in the retail sector was way out of line for an economy just skimming along. The graph below is the historical retail sector jobs growth (in thousands) for the month of November with approximately 50,000 more jobs than one would expect. My takeaway is that unless there was a huge jump in retail sales, it is seasonal employment which occurred earlier than normal. If it is seasonal employment, expect these jobs to disappear in January.

If I am correct, this would explain how the jobs growth was 50,000 higher than expectations.

In perspective, it is income which i watch. With income comes spending. And per capita income really has not changed for five long years - and this is what one of the major headwinds of economic growth.

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The Econintersect economic forecast for December 2012 shows weak growth. The underlying dynamics continue to have a downward bent. There are recession markers still in play, and one of our alternate methods to validate our forecast is recessionary. All in all, not a great forecast - but not one which would cause you to jump out the nearest window either.

ECRI believes the recession began in July 2012. ECRI first stated in September 2011 a recession was coming . The size and depth is unknown. The ECRI WLI growth index value has been weakly in positive territory for over three months. The index is indicating the economy six month from today will be slightly better than it is today.

Current ECRI WLI Growth Index

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Initial unemployment claims rose from 343,000 (reported last week) to 361,000 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 - continued to fall from 381,500 (reported last week) to 367,750. 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.

Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2010 (blue line), 2011 (red line), 2012 (green line)

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Bankruptcies this Week: UFood Restaurant Group, Edison Mission Energy, GuildMaster, Imagenetix, THQ

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

  • Rail movements (where the economic intuitive components indicate a moderately slightly expanding economy).
  • There were many important data releases this week which some use to forecast - durable goods, personal income - even gdp - I see little intuitive in these measures except trend lines.

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:
Is Cloud Computing the Next Employment Driver? Weekly Wrap-Up 21 December 2012
What We Read Today 21 December 2012
Kansas City Fed: Manufacturing Activity Contracts Less in December 2012
ECRI's Weekly Leading Index Growth Index Continues to Improve w/e 14 December 2012
Final December 2012 Michigan Consumer Sentiment Goes From Bad to Worse
CFNAI Super Index Jumps to Six Month High in November 2012
Durable Goods New Orders Beat Expectations but Still Not Good In November 2012
November 2012 Real Personal Income / Expenditure Remove Recession Clouds
Infographic of the Day: Finding Ice on Mercury
Fed's Balance Sheet 19 December 2012: Balance Sheet Up $41.2 billion
One Minute After the End of the World
Phishing With a Pay Pal Mask
It's the most wonderful time of the year
Zeroing In On a Strategy
Plan B Collapses
Rail Week Ending December 15, 2012 Expansion Continues (Ignoring Coal)
Bill Traster Interviewed from Copan, Hondouras
Gun Bans Won't Work
What We Read Today 20 December 2012
December 2012 Philly Fed Survey Way Over Expectations
November 2012 Existing Home Sales Remain Strong
November 2012 Leading Economic Index Projects Weak Growth
15 December 2012 Unemployment Claims Back Into 2012 "Normal" Levels
Third Estimate 3Q2012 GDP Lifts GDP to 3.1%
Infographic of the Day: A Case for Profit
Inflation Targeting Dead, Long Live Inflation
The Red Dragon Spreads Its Wings
Gold as Central Bank Insurance
Holiday Consumer Activities
China: Leading Economic Indicator Rises
Japan: QE Expands
Reviews Praise Frank Li Book
Bloomberg: Time For Executive Prosecution in LIBOR Case
Guns for Christmas: Timing is Everything
Update on Cerulean Credit Card
What Does the New Community Reinvestment Act (NASDAQ:CRA) Paper Tell Us?
What We Read Today 19 December 2012
Nonfinancial Leverage NFCI Increased Slightly w/e 14 December 2012
Residential Building Sector Continues to Expand in November 2012
Stratfor: Geopolitics of Shale
Infographic of the Day: Workplace Safety
Last Week's Unemployment Claims Data Was Not Good News
Koo on Reserves Time Bomb - 500% Inflation
Sympathy for the Deficit - or Better Empathy?
Japan: Third Largest Trade Deficit on Record
UBS: $1.5 Billion LIBOR Settlement
S&P Upgrades Greek Debt
Will the Unemployment Rate Increase As the Economy Improves?
Year End Bonuses Growing in 2012
Predatory Lending on the Prowl
A Bubble in Fixed Income?
Asia in 2013
What We Read Today 18 December 2012
Infographic of the Day: Layman's Guide to Medical Imaging
How Many Trillions to Sing "We Shall Overcome"?
Gold: Monetary Collapse Insurance
Apple: Which Way Now?
November 2012 Sea Container Counts Affected by Strike
Phishing Scam Using Wells Fargo Name
HFT: When The Speed of Light Isn't Fast Enough
Investment Primer for the Middle East
Still More Left in this Bull Market
What We Read Today 17 December 2012
December 2012 Empire State Survey Shows Contraction Continuing
Infographic of the Day: 10 Worst (and Best) Places for Small Business
The Strange Case of the Trillion Dollar Coin
The Only Reason to Short Gold
The Natural Rate of Interest Is Zero
2013 Oil Price Forecast: A "Must-Have" Profit Play Next Year
Stephanie Kelton Lecture on Sectoral Balances and the Fiscal Cliff
Insider Trading 14 December 2012: Selling by Garmin, Simon Property Group
How the Fed Rules and Inflates
What We Read Today 16 December 2012
Japan: Conservatives Win Big
Sunday Economic Comedy: Debt and Slavery
Infographic of the Day: OSHA Generating Revenue for the U.S Government
The Hollowing Out of America
Boehner: Raise Taxes $1 Million and Up
Poisoning the Well: How the Feds Let Industry Pollute the Nation's Underground Water Supply
Is US Debt Caused by the Trade Imbalance?
Are High College Costs Redistributive?
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.