Today’s update on weekly jobless claims delivers the best news for the labor market in recent memory. It certainly one of the strongest reports for this series since the Great Recession ended in June 2009. However you describe today’s news for this leading indicator, it’s unequivocally encouraging, and powerfully so. Yes, it may be misleading, as any one data point for this volatile series can be, and so we should be wary until we see more numbers in the weeks ahead. But at the very least today’s update strengthens the case for expecting continued healing in the labor market and slow economic growth, perhaps at a moderately faster pace. Analysts in the recession-is-here-now camp, in other words, have some explaining to do.
Jack Welch, Employment Data, And The Big Picture
Jack Welch insists that the September jobs report, released last week, is “strange” and “implausible.” Specifically, the economy’s sluggish growth doesn’t support the reported drop in unemployment last month to 7.8% from 8.1% in August. It just “doesn’t make sense,” the former head of General Electric writes in The Wall Street Journal. The problem, he explains, is that the methodology behind the household employment survey, which is the source of the unemployment number, is less than perfect. Agreed. But why stop there? If we’re fired up about finding reasons to question economic indicators–one at a time, in a vacuum–the opportunity is unlimited for casting aspersions across the statistical landscape. This is a dead end, however, if we’re looking for deeper insight about the economy and the business cycle. Pointing out flaws for a given data series has merit, but not much. The bigger issue is deciding how to interpret the numbers in search of reasonably reliable perspective. Fortunately, the outlook isn’t as bleak as Welch’s essay implies.
Who Moved My Peak Oil?
The buzz about peak oil has peaked, and for a good reason: the peak remains MIA. That doesn’t mean that the global supply of crude oil is a non-issue. Far from it. But for the moment, at least, statistical evidence in favor of arguing that the world’s output of crude has hit a ceiling, or is in imminent danger of doing so, looks thin.
Q3:2012 U.S. GDP Nowcast Update | 10.8.2012
The case for anticipating slow growth in the third quarter rolls on. Today’s update of The Capital Spectator’s suite of nowcasts for third-quarter real GDP remain steady relative to the previous revisions from September 30. The current numbers incorporate last week’s economic updates for several September indicators, which continue to signal slow growth for the economy (see here and here, for example). The models tell us that when the government releases the official GDP report for Q3 on October 26, the odds still look favorable for expecting that the economy’s real (inflation-adjusted), annualized change will be slightly better than the sluggish 1.3% growth reported for Q3. This outlook is supported by the incoming data for September for estimating the broad economic trend (as we discussed earlier today), which suggests that there’s still forward momentum in the economy overall and that recession risk remains low, given the latest numbers available.
U.S. Economic Trend Update | 10.8.12
The September data published to date suggests that the U.S. economy continues to grow. The expansion remains sluggish, but it’s still growth. Of the eight September indicators published so far for The Capital Spectator Economic Trend Index (CS-ETI), six are trending positive. That implies that recession risk was still low last month. But the reading is based on incomplete numbers. When the remaining indicators for CS-ETI are updated for September, we’ll have a clearer picture of the broad economic trend. For now, the signs look encouraging. One of September’s indicators—the ISM Manufacturing Index—turned positive for the first time since May, as we discussed last week. With that change for the better, and no reversal of fortunes so far in the other indicators that have been updated, September’s profile is slightly brighter than August’s. But with a half-dozen September updates yet to come, it’s best to reserve judgment in the current environment.
Book Bits | 10.6.2012
● Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself
By Sheila Bair
Review via Real Clear Markets
In her new book, “Bull By the Horns,” former FDIC chairman Sheila Bair revisits a wide range of policy debates that occurred during her tenure from 2006 to 2011. Chairman Bair has appropriately received acclaim for having steered the FDIC through the crisis, and especially for being among the first to identify the foreclosure crisis and call for policy action to address the problem…. A succinct description of “Bull By the Horns” is that lots of mistakes were made during the crisis – by others. Current Treasury Secretary Timothy Geithner receives particularly vivid criticism, a feature of the book that is not surprising in light of the widely-known animus between the two officials.
Private Payrolls Growth Remains Sluggish In September
September was another month of slow jobs growth, the government reports. Private payrolls increased 104,000 last month, according to the Labor Department’s establishment survey. (Total payrolls, which include government jobs, rose 114,000.) That’s up from August’s revised gain of 97,000 for the private sector, but no one will be impressed with these numbers. Nonetheless, there’s no smoking gun here for arguing that the labor market is collapsing. It may be suffering a slow and lingering death, in which case the last rites may be administered at some point down the road. In the here and now, however, private-sector job growth of 104,000 doesn’t signal that the economy’s in recession, even if it’s not hard to envision a change for the worse in the near-term future. Nor does the 1.7% year-over-year growth in private payrolls through last month tell us that the jig is up. It’d be another matter if September data so far from other sources screamed of free-fall. But that’s not the case either (see here and here, for instance).
A Slight Jump For Jobless Claims Last Week
Jobless claims rose slightly last week, but the generally declining trend is still bubbling. New filings for unemployment benefits increased 4,000 to a seasonally adjusted 367,000 for the final week of September. More importantly, the large drop reported a week ago is holding up and claims continue to drop each week relative to year-earlier levels.
Services Sector Growth Improved In September
The services sector continued to expand in September, the Institute for Supply Management reports. Its Non-Manufacturing Index increased to 55.1 last month, up from 53.7 in August. That’s a sign that the services sector overall grew at a faster pace in September, ISM advises. It’s also another clue for thinking that the U.S. economy continued growing last month. Indeed, with today’s ADP Employment Report and Monday’s release of the September update of the ISM Manufacturing Index, we now have three indicators that collectively suggest that last month wasn’t the start of a new recession.
ADP: A Modest Gain For September Payrolls
Private non-farm payrolls increased by 162,000 last month, according to this morning’s ADP Employment update for September. That’s down a bit from August’s revised 189,000 gain, which suggests that we should keep our expectations in check for Friday’s official September jobs report from the Labor Department. Nonetheless, there’s nothing conspicuously dark in today’s data dump to suggest that the slow growth trend rolled over last month. In fact, when you consider today’s ADP release with yesterday’s mild rebound in the ISM Manufacturing Index last month, the case is a bit stronger for expecting September to remain in the growth camp (once all the month’s numbers are published).