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It Is Not The Employment, But Income Which Makes The Economy Terrible

Friday's Jobs report was not that bad (my jobs analysis) - it was the personal disposable income which tells the story of a "mediocre" economy.

Besides claiming the BLS had a seasonal adjustment error this month (because the unadjusted data had the largest jump in July employment in history), I also stated that there was an obvious continuing improvement in the rate of growth for over one year (red line in chart below). The data was averaged as it is noisy.

Unadjusted Data: Year-over-Year Rate of Growth (blue bars, left axis) and 3 month rolling average Change in the Rate of Growth (red line, right axis)

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Without a doubt, this is the worst employment recovery since the Great Depression. But what makes this recovery terrible is the consumer is getting no money into its pocket - after all, the jobs recovery has been averaging 2% per year.

Real (Inflation Adjusted) Disposable Personal Income (Blue Line) and Population Growth Adjusted Disposable Personal Income (Red Line)

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Since the beginning of the Great Recession population adjusted real disposable personal income (which is distorted by income of the 1%) has grown only 2.5% - an average of less than 0.5% per year. And in the last year, this growth is negative 0.11%.

The Econintersect economic forecast for August 2013 again declined, and sees the economy barely expanding. The concern is that consumers are spending a historically high amount of their income, and several non-financial indicators are struggling or flat.

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

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Initial unemployment claims improved from 343,000 (reported last week) to 326,000 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.

The real gauge - the 4 week moving average - improved from 345,250 (reported last week) to 341,250. 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)

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Bankruptcies this Week: Gryphon Gold

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:

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