Steven Hansen's  Instablog

Steven Hansen
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Steven Hansen is an international business and industrial consultant specializing in turning around troubled business units; consults to governments to optimize process flows; and provides economic indicator analysis based on unadjusted data and process limitations.
My company:
Econintersect LLC
My blog:
Global Economic Intersect
  • The Economy Seems To Be Improving Behind The Scenes 1 comment
    Oct 26, 2013 8:23 AM

    My instablog posts in October have always included the following paragraph.

    The Econintersect economic forecast for October 2013 again improved and it appears an improving cycle has begun. There is no indication the cycle is particularly strong, as our concern remains that consumers are spending a historically high amount of their income, and the rate of gain on the points we watch are not very strong.

    I am just starting work on the November forecast and I always start with estimating the answer the analytical process will yield. As an engineer, it has been beaten into me that a good engineer knows the answer before he/she begins to calculate.

    I believe the forecast will improve - because it is a relative forecast based on the situation in the previous month. The in general is showing subtle gains. Most do not understand that rail is likely one of the best real time tools we have in understanding the economy.

    Rail moves crude materials which will appear on consumer shelves several months in the future. Rail moves containers and truck trailers which will be on consumer shelves one to two months in the future. Rail moves crude and processed materials to ports. So consider these extracts from my weekly analysis:

    • Four week rolling average rate of growth (compared with the average one year ago) is accelerating, and is better than the 4 week rolling average one year ago;
    • 13 week rolling average rate of growth (compared with the average one year ago) is accelerating, and better than the 13 week rolling average one year ago;
    • 52 week rolling average rate of growth (compared with the average one year ago) is accelerating, and better than the 52 week rolling average one year ago.
    • This is the 12th week of improving data.

    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

    (click to enlarge)

    Initial unemployment claims went from 358,000 (reported last week) to 350,000 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 - degraded from 336,500 (reported last week) to 348,250. 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)

    Bankruptcies this Week: Molecular Testing

    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.

    All of my weekly analysis of economic releases [can be seen here]

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

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  • Moon Kil Woong
    , contributor
    Comments (13559) | Send Message
     
    The 4 week average remains a more reliable gauge not a reliable one. Also this is seasonally adjusted.

     

    As shown, this is rising not falling and even though the long term trend is down minorly even though the participation rate in the US Is down. I personally agree with economists that the percent of the total population working is a much more significant statistic of overall economic health than the unemployment claims rate which is manipulated in a variety of ways. The fact that the percentage of 18-25 year olds not working is rising is a particularly very bad sign the administration is not acknowledging or addressing.

     

    Clearly the effects of the recession have not been eradicated. On the contrary, thanks to stimulus, QE, keeping TBTF banks afloat and helping them to grow, socializing Fannie Mae and Freddie Mac, etc. the main players of the recession are bigger, stronger, and more tied to the government than ever making the problems bigger and more systemic. We are not solving the problems we are making them bigger by covering them up and giving them taxpayer benefits, 0% Federal Reserve discount rates, special treatment, and legal perks like designating them TBTF banks so they can go out and steal banking business from smaller stronger banks by saying they are considered backstopped by the taxpayers.

     

    Only in the cracked world of communist/socialism is it a badge of honor and a selling point to say that you are so big and weak the government must prop you up and backstop you. Think again if you think our banking system is privatized, it is running from capitalism not towards it and is doing it by shoveling its own risk onto the public.
    26 Oct 2013, 12:36 PM Reply Like
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