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Weekly Summary: How Good Is Our Economic Data

It is obvious to those who have lived in the real world, that one cannot accept theory as fact. We naturally understand that there are billions of variables and dynamics in play - and the trick is to understand dominance. We know from the real world that:

  • it is impossible understand all the forces in play,
  • we know a certain percentage of all decisions (depending on the decision maker 10% to 20% are wrong) because literally all decisions are make without 100% of the needed information,
  • a good manager believes he made the right decision but is more than willing to change a decision as additional info flows in,
  • that an organization must monitor effects of a decision to understand its effectiveness.

Sometimes I wonder if economists have this understanding? Many economic studies appear to be data mined (they start with a theory and prove it ignoring data which does not fit). The other problem in the economic community is ostracism - once you try to "prove" mainstream theory is incorrect - you can kiss off advancement or positive recognition.

There are grains of truth in all economic theory - but the application of theory to a particular situation is where we run into trouble. My issue is the data gathering, and methodology of analysis. I believe that we are monitoring the wrong pulse points because we have lost sight of the forest for the trees.

Another issue is that we are gathering economic data unnaturally - and in my experience, this creates a data base so flawed that it gives the wrong answer. One data gathers using existing systems that the sectors use to control their own work. Take employment - you would use social security data with IRS data - not go out and survey. This is not a perfect method, but the answers would be consistent. It is hard to believe the large monthly variation in the seasonally adjusted data for the BLS Jobs Report is not caused by data gathering.

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

Initial unemployment claims rose from 361,000 (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 (background here and here).

The real gauge - the 4 week moving average - continued to fall from 367,750 (reported last week) to 356,750. 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)

Bankruptcies this Week: AuraSound

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:
China and the US: What the Future Holds Weekly Wrap-Up 28 December 2012
What We Read Today 28 December 2012
ECRI's Weekly Leading Index Growth Index At 8 Week High w/e 21 December 2012
November 2012 Pending Home Sales Show Housing Recovery Continues
Chicago Purchasing Managers Barometer Improves Slightly in December 2012
Infographic of the Day: Dwarf Planets in Our Solar System
Saving America, Chinese Style: Another Peek Inside …
Equity Index Futures Daily Price Limits
Rail Week Ending December 22, 2012: Traffic Is Up Year-over-Year
Fed's Balance Sheet 26 December 2012: Balance Sheet Up $5.5 billion
Chicago Fed Midwest Manufacturing Index (CFMMI) Expands in November 2012
Coincident Indicator Review: Philly Fed USA Coincident Index Continues to Show Growth in November 2012
Bernanke Loosens Up
What We Read Today 27 December 2012
November 2012 New Home Sales Improve
December 2012 Conference Board Consumer Confidence Drops over the Fiscal Cliff
Nonfinancial Leverage NFCI Deteriorated Slightly w/e 21 December 2012
22 December 2012 Unemployment Claims Continue to Moderate
The Federal Reserve's Magic Act is Destroying America
Herbalife: What Now?
2013: The Year of Taxes
Infographic of the Day: The Last Full Moon of 2012
Secrets Of $NYUD
"Deficit" Is the Wrong Word and Concept
What We Read Today 26 December 2012
Richmond Fed Manufacturing Activity Shows Less Good Growth December 2012
Case-Shiller Home Prices Show Strong Gain in October 2012
Infographic of the Day: How to Be Organized
Average Gasoline Price Rise $0.003 in Week Ending 24 December 2012
Jeffrey Sachs: We Need to Think About the Long-run
The Best Reporting on Guns in America
Stratfor: Geographic Challenges for Mexico, Egypt, Greece
Stocks Beat Gold in 2012
The Lie that Prosecuting Bank Fraud Will Destabilize the Economy Is What Is REALLY Destroying the Economy
Why Join A Game That's Already Been Played?
What We Read Today 25 December 2012: Merry Christmas!
Infographic of the Day: Space Junk on the Moon
Christmas Comedy: A Fiscal Cliff Sing-along
2013 Silver Price Forecast: Silver Will Perform Like Gold on Steroids
Charts I'm Watching: Dec 24, 2012
Doctors: Gun Safety Research Blocked
'Twas the Night Before Christmas (A Fiscal Story)
A Christmas Carol (MMT Version)
Tracking Santa
What We Read Today 24 December 2012
Christmas Eve Comedy: The Fiscal Cliff has Screwed Santa
Infographic of the Day: Graduating Our University Students
These Five High-Tech IPOs Are On Fire
Patrick Leahy, Where are You?
Gold Decline Gains Momentum
Europe: Summary of Selected News
Historical Comparisons - The Recovery From Super Storm Sandy
Insider Trading 21 December 2012: Liberty Media Corporation Big Purchaser
BEA Raises 3rd Quarter 2012 GDP Growth Estimate Once Again to 3.09%
What We Read Today 23 December 2012
Coming Week: What Could Disturb the Expected Quiet?
Infographic of the Day: 25 Ways to Get Pulled Over in California
Sunday Economic Comedy: Not Funny When You Don't Have a Job
The Week Ahead: Decision Time Has Arrived!
Manipulation of Gasoline and Oil Markets
Trucking Tonnage Rises in November 2012 - Hurricane Sandy After Effect
Vehicle Traffic Volumes Rose Marginally 0.3% in October 2012
What We Read Today 22 December 2012
Infographic of the Day: Golden Spike Company Flies to the Moon
Saturday Economic Comedy: A Little Street Economic Humor
Productivity is Bad: The Economy Follows
Initial Unemployment Claims Back on Track
Forexpros Becomes for $2.45 Million
Is Cloud Computing the Next Employment Driver?
What We Read Today 21 December 2012
Kansas City Fed: Manufacturing Activity Contracts Less in 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
December 2012 Philly Fed Survey Way Over Expectations
November 2012 Existing Home Sales Remain Strong
November 2012 Leading Economic Index Projects Weak Growth
Third Estimate 3Q2012 GDP Lifts GDP to 3.1%
Holiday Consumer Activities
Residential Building Sector Continues to Expand in November 2012

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