Today’s weekly update on initial jobless claims tells us that nothing much has changed. That’s a good thing when it comes to evaluating the business cycle at the moment. This leading indicator fell modestly by 6,000 last week to a seasonally adjusted 361,000, the Labor Department reports. That’s near a four-year low, a sign that recession risk is low.
Monthly Archives: August 2012
A Familiar Sight: Higher Equity Prices & Rising Inflation Expectations
The market’s inflation outlook has popped a bit in recent weeks. The stock market has moved higher too. The new abnormal, in other words, remains intact.
A Summer Dip For The Monetary Base
For the first time since late-2010, the monetary base in the U.S. has been contracting on a year-over-year basis as of this past June. Does that represent a significant change for assessing risk in the outlook for the business cycle? Possibly… if the contraction rolls on.
Beware Of Drama In Your Daily Dose Of Investment Advice
What’s the biggest challenge for investors these days? Macroeconomic risk? The threat of war in the Middle East? Slow economic growth? A collapsing euro? One can argue that the explosion of information and advice (much of contradictory) is the number-one hazard for thinking clearly and designing a portfolio that will succeed over the medium- and long-term horizons. What’s the antidote to the noise that permeates our digital world? It starts by considering the major asset classes and a benchmark of these betas, such as the Global Markets Index that’s routinely updated on these pages.
Book Bits | 8.4.2012
● Red Ink: Inside the High-Stakes Politics of the Federal Budget
By David Wessel
Interview with author via Yahoo’s Daily Ticker
You’re probably aware the U.S. government spends a lot of money and more than it brings in. But few Americans have a really good understanding of how the budget works, where the money comes from and where it goes. In Red Ink: Inside the High-Stakes Politics of the Federal Budget, Wall Street Journal economics editor David Wessel shines a light on the federal budget and seeks to clear up some of the “myths and unrealities”….
Risky Business: Focusing On Monthly Employment Numbers
Some economics pundits needlessly bang their heads against the wall when it comes to the art/science of digesting the numbers. Today’s example: the Labor Department’s employment report for July. Although economists focus on the so-called establishment survey for assessing nonfarm payrolls, the government also publishes an alternative measure of the labor force via what’s labeled as the household survey. These are two different methodologies for quantifying changes in the labor force that, not surprisingly, don’t always agree on a month-to-month basis—July’s statistical conflict was unusually wide. The divergence creates a fair amount of confusion, but it shouldn’t. You can find a clearer view of the trend in the year-over-year changes, which is an antidote of sorts for the monthly noise.
Private Payrolls Rebound In July
Nonfarm private payrolls rose 172,000 last month on a seasonally adjusted basis, the Labor Department reports. That’s substantially higher than the roughly 100,000 gain predicted by the consensus forecast among economists. Today’s number is also a respectable improvement over June’s revised increase of 73,000. The better-than-expected result for July isn’t a complete surprise, however, given the hints in Wednesday’s ADP Employment Report. Surprising or not, today’s employment report offers another data point for arguing that the economy isn’t falling off a cliff into a new recession.
Jobless Claims Rise, But Remain Near 4-Year Low
Initial jobless claims rose moderately last week, but this doesn’t tell us much. The good news is that claims remain close to a four-year low and the unadjusted year-over-year change in new filings for unemployment benefits continues to fall by roughly 10%. In short, there’s still no sign of trouble in the claims data, which suggests that the labor market will continue to expand slowly.
Another Weak Report With The July Update Of The ISM Mfg Index
For the second month in a row, the ISM Manufacturing Index was under 50—a sign that the manufacturing sector is contracting, if only slightly. Many analysts argue that a reading under 50 for this benchmark is an early warning that a new recession is near, or perhaps one that’s already started. But like any other indicator, the ISM index isn’t flawless: there have been a dozen or so instances over its 60-year-plus history when a below-50 reading wasn’t quickly followed by a recession. Still, the fact that this benchmark is now under 50 for the second consecutive month—the first run of below-50 readings since the last recession—is a sign that the manufacturing sector is struggling.
A Better-Than-Expected Gain In July Payrolls, ADP Reports
Private nonfarm payrolls for the U.S. increased a better-than-expected 163,000 in July, according to the ADP Employment Report. The consensus forecast was looking for a substantially lower 125,000 gain, according to Briefing.com. Is the relatively upbeat news a sign that we could see another upside surprise in Friday’s official report from the Labor Department on the state of the jobs market? It’s a thought worth considering.