Consider the following charts of the 4-week moving average of initial unemployment claims
The above chart shows that, overall, the trend is still lower and that claims have made decent headway from their highs. However, also note that we're still not below the 400,000 level in any meaningful way.
The above chart shows the number started dropping for a second time in the latter half of last year. But we've recently seen a spike that is most disconcerting. I've seen various explanations for the above numbers, with the most logical being that high fuel prices are forcing employers to cut other expenses -- namely, payroll.
The last time I wrote about durable goods, I said the following:
With the recent drops in three Fed region manufacturing indexes (Philadelphia, Dallas and Richmond) -- and manufacturing being a key driver of the current expansion -- these data series are disproportionately important. The durable goods chart is starting to look a little better. However, I'm going to reserve judgement for the next few months as we get more information about the manufacturing sector.
The latest news from this number was disappointing and put the chart back in the "concerning me" category:
When you combine all this with the recent slowdown news from the various regional Fed indexes, you get some possible problems.
I should add, that the vast majority of the regional Fed indexes are still printing strong future expectations numbers. This tells us the participants in the sector see the current manufacturing situation as temporary. I'm guessing that most people are thinking the problem is primarily centered on Japan digging out from the earthquake. But with India, China and Brazil facing higher inflation -- and with their respective central banks looking to slow that inflation by raising rates and reserve requirements -- I have to wonder whether the slowdown is more than temporary.
The of course, there are gas prices:
While prices ticked down recently, they are still high enough to choke the economy into slower growth. As I noted in the latest retail sales figures, consumers are shifting their spending to core items (food and gas) at the expense of other purchases.
These three areas add up to a slowdown. Now the question becomes how long will it last?
2 comments:
The average of initial claims might rationally be divided by the size of the labor force, the population, or something, to give a scaled image. 400,000 initial claims are a bit less serious in China than in Luxembourg.
Yeppers. Unemployment and various other pressures keeping general demand low are my really big concern right now. Add high gas prices to it, and it's a _possibly_ catastrophic problem going forward.
Oil should come down with all the weakness in other data, but there's so much speculation in that market right now, I don't know that it will drop enough in time (especially given the long lag to seeing prices at the pump go down).
The OMG HYPERINFLATION! crew are really kind of making life hard, pumping up commodity prices while consumer demand is still struggling to stand up. It would be more ok with me if there were any signs of major general inflation on the horizon, but it's more like an article of faith and an expression of deeply held political ideas right now, all the data in the world isn't going to convince them. Meanwhile, their faith is doing real harm.
I've been viewing this whole thing in the US, since the initial financial crisis calmed down here, as fundamentally a low-disposable-income, low-demand driven problem with huge deflationary headwinds, something we really haven't seen to this degree in a very long time. I worry, but don't know, that we're seeing the results from having too little now to fully counter a deflationary overall environment.
I keep waiting to see wages/demand start to improve in a sustained way, but every time they start to do so a little, prices for necessities rise as much or more. Where we're seeing inflation, we're seeing it in unavoidable expenses, and it's not combined with decent wage increases or growing employment. That's extremely dangerous, IMO -- forget spending vs. saving, people are often doing neither right now beyond spending for the barest of need, much of which is imported.
I think the _only_ big picture bright spot I'm really seeing is higher than expected local and state tax revenues. I'm hoping it'll calm the cutting -- falling government spending, cuts to the safety net, and ailing public sector employment are really taking a substantial bite out of growth. I do live in a government kind of a town, granted, so maybe I'm biased there, but it's an absolutely huge impact here, and it filters through to suppress demand for every scrap of the local private sector. 50 Herbert Hoovers, indeed.
Ramble, ramble. Thoughts on a Friday morning. Agree with the post, all causes for concern.
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