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A Bad Hair Week - How About Government Austerity?

At first or second glances this seems like a bad week:

  • GDP came in under expectations but still 2.5%. The number was weaker than your first glance as inventory build was a large component in the number, and I believe the spending data and the trade data may be weaker in the last part of the quarter (meaning 1Q2013 GDP will decline by the third estimate).
  • New Home sales came in strong but the data has been oscillating. If one uses a three month rolling average, the data is unchanged.
  • Durable goods was down more than expected. To this analyst, the data was soft in most areas of durable goods.

Yet, all of this is rear view mirror views of the economy. My opinion is that the data overall is weaker than even my forecasts would have expected. Could it be that Federal government austerity has a higher multiplier than one would think?

I doubt it, but I am looking for a root cause of this general weakness cycle when there should be some firming

The Econintersect economic forecast for April 2012 improved marginally, and is now 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. Not to end on a negative note, the majority of pulse points are improving.

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 fell from 352,000 (reported last week) to 339,000 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 361,250 (reported last week) to 357,500. 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)

/images/z unemployment.PNG

Bankruptcies this Week: none

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

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:
Congress Considers Screwing Seniors
Terminal Velocity (5) - 'The Wind Blows Towards Jackson Hole'
Gold's Flash Crash: BUBBLEOMIX Analysis
The Debt-Deposit Duality
Paper Power - (Part II)
New York Times Firewall Effect Fading
19 April 2013 ECRI's Weekly Leading Index Growth Improves Marginally
Final April 2013 Michigan Consumer Sentiment Is Down From Last Month, But Still Up
Advance Estimate 1Q2013 GDP Is 2.5%
Investing.com Weekly Wrap-Up 26 April 2013
What We Read Today 26 April 2013
Markets Go Nowhere Today, Remain Flat And Lackluster
Suspicion grows over Syria chemical weapons
Averages Continue To Melt Downward And Flat
Markets Open Down, Flat And Lackluster
Fed's Balance Sheet 24 April 2013 Again at New Record
Week Ending 20 April 2013: Total Rail Traffic Slowing
Infographic of the Day: Cosmic Menagerie: A History of Animals in Space
The OTA Bull Trap
"No Business" For France's Public Investment Bank
Venezuela: Time for Reconciliation
Investing.com Technical Analysis 25 April 2013
Japan: Deflation Deepens
Reinhart and Rogoff Respond ... Again
Stephen Colbert Reviews Reinhart and Rogoff with Thomas Herndon
U.S. Ranks Only 8th Globally for Internet Speed
Prometheus: Gold Market Oversold Reaction Continues
The Lessons of Reinhart/Rogoff for the Construction of Reality
Global Interbank Lending Falls to Historical Low in Q4 - BIS
Will Germany Lead the World's Energy Revolution?
Durable Goods Orders Show US Manufacturing Continuing Secular Decline
Making The Case Against Austerity
What We Read Today 25 April 2013
Markets Trading In The Green But Expected To Fall
Kansas City Fed: Manufacturing Activity Contracts for Seventh Month in April 2013
How Medicaid and Obamacare Hurt the Poor - and How to Fix Them
Markets Open Higher, Bears Temper Further Rise
20 April 2013 Unemployment Claims 4 Week Average Improves
Infographic of the Day: Private Antares Rocket & Cygnus Spacecraft Explained
My Email Exchanges with Senator Rand Paul
It's A Housing 'Recovery' In Orwellian Terms - Here's The Reality
Giving Up on Gold
Is This the Beginning of the Big One?
Mine Producing 17% of U.S. Copper Closed Temporarily
The War Between Economic-Political World and Financial-Banking Interests
The Great Debate: How is U.S. Governance Broken?
Abenomics Must Bring Seismic Change to Japan
Markets Closed About Even, DOW Lost Most
What We Read Today 24 April 2013
Trucking Tonnage Again Grows in March 2013
New Hundred Dollar Note to be Issued 08 October
Nonfinancial Leverage NFCI Continues Less Good Trend w/e 19 April 2013
Indices Flat, Lackluster, Mixed On Low Volume
Infographic of the Day: One Drink Too Many: Is it the result of Nature or Nurture?
Police Save Suicidal Man From Train At Last Second!
Markets Open In The Green, Melt Into The Red And Flat
Durable Goods New Orders Are Not Good in March 2013
Australia: Will Buy Chinese Government Debt
Is There a Longevity Myth?
Is the Federal Reserve Breeding the Next Financial Crisis?
Investing.com Technical Analysis 23 April 2013
What do U.S. Life Insurers Invest In?
CBO Testimony: How Chained CPI Will Reduce Social Security Payments
Dramatic Shift To Bearish Sentiment
Democracy Is Broken: The Shameful Gun Vote of the US Senate
Markets Close Up But Down From Afternoon Highs
What We Read Today 23 April 2013
Why Has Household Debt Reduced Following the Great Recession?
Averages Continue To Post Gains On falling Volume
China-US Squabble: Beijing slams 'woeful' US human rights record
Coincident Indicator Review: Philly Fed USA Coincident Index Continues Growth in March 2013
Richmond Fed Manufacturing Activity Contracts in April 2013
Market Gap Up On Moderate Volume
March 2013 New Home Sales Growth Rebounds Partially From Last Month
Week Ending 22 April 2013: Marginal Gasoline Price Decline
Infographic of the Day: Google Glass
Stratfor: Why the Boston Bombers Succeeded
Double Top Forming in US Dollar?
Dark Clouds on the Horizon
Reinhart and Rogoff Critics Won't Go Away
China: Flash PMI Disappoints
Heroes of the Great Depression II
Can Wall Street Continue to Rally Without the U.S. Economy?
Are Earnings Expectations Realistic?
What We Read Today 22 April 2013
Japanese Inflation Expectations, Revisited
Commercial Real Estate and Low Interest Rates
Ms Lagarde and The Tribulations of A Corrupt French State Bank
iOS Beats Android Ad Performance
Australian Senator Condemns Forced Organ Harvesting in China
How Elderly Costs Vary From the General Population
March 2013 Existing Home Sales Show Average Growth
CFNAI Super Index Shows Slowing Economy In March 2013
The Effect of Superstorm Sandy on the Macroeconomy
Infographic of the Day: How the Antimatter-Hunting Alpha Magnetic Spectrometer Works
The Week Ahead: Interpreting Mixed Signals
Hume on Microfoundations of Macroeconomics
Judgments of Paris, Princeton, and Lenox, Part 5
What We Read Today 21 April 2013
Key Currency Pairs 21 April 2013
Hagel to finalise Middle East weapons deal
Reinhart. Rogoff. Wrong.
Latest U.S. Housing Smoke and Mirrors
Special Alert: The Dow Is in Trouble
Why Doesn't IMF Track Inflation for the Eurozone?
Trefis: Highlights Week Ending 19 April 2013
The Storm Before the Calm
Does Government Create Jobs?
Screwing the American Economy by Screwing Its Young
Gold's "Bear Market": 4 Things Investors Should Know
Pakistan Police Place Ex-President Musharraf in Custody
Texas fertilizer plant explosion registers as earthquake, many buildings leveled
Prometheus: Hoisington and Hunt Review the Excessive Debt Problem
CCTV: Chinese driver zooms off with cop on hood
Prometheus: Stock Market Speculative Advance Nears End
Graphic video: First moments after Boston Marathon blasts

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