October 18, 2007
ANOTHER WARNING SIGN?
Sometimes the numbers send out a warning, sometimes not. Deciding which one prevails and when is part of what makes the dismal science interesting--and frustrating.
The challenge presents itself anew today in the wake of this morning's update on initial jobless claims. What, if anything, are the numbers telling us? Taken at face value, the answer's clear: the number of workers filing for unemployment benefits jumped last week to the highest level since late August. That could signify nothing more than the usual give and take that accompanies this volatile data series when measured in seasonally adjusted terms, as our chart below shows.
Statistically, we're still within the "normal" range, based on a reading of recent history. But until and if initial claims move materially higher, it's still an open question if there's an early warning sign brewing here in terms of the economy's future path.
Traders, of course, are an impatient bunch and so they aren't inclined to wait for additional context. Consider trading in Fed funds futures, which have already read this morning's news and decided that it's best to assume that the economy is weakening on the margins. Such thinking has inspired buying in the November '07 contract to the point that the crowd's becoming increasingly convinced that the Fed will cut rates again by 25 basis points at the next FOMC meeting on October 30/31.
Whether another rate cut will keep the bulls happy generally is another question. Judging by this morning's slide in stocks, it'll take more than 25 to keep the train rolling.
Posted by jp at October 18, 2007 10:17 AM
Is there a way to determine how many people are covered by unemployment today versus 2000? Contractors and part-timers are not eligible for unemployment in many states and I would bet less people are covered today than in the past because of the jobs available today.
Posted by: me at October 18, 2007 11:56 AM