- by New Deal democrat
The very same data that told Bonddad and me seven months ago that the economic free fall was going to stop, and that has ever more strongly pointed to recovery, the Leading Economic Indicators, are now known for November.
As I hinted last week, this could be the first month since then that the LEI actually go down, although my best estimate is for a small gain, thanks to a surge in the manufacturing workweek, making it 8 positive months in a row. Here's the list with my best estimates:
The yield curve is still positive +0.25
Aggregate hours in manufacturing were up strongly +0.21
Stocks' 3 month gain is worth +0.1
Jobless claims were much better, +0.13
Durable goods' strong growth add +0.2
Consumer nondurables up substantially, + 0.1
Real M2* has turned slightly positive, so +0.05
ISM deliveries down, -0.08
Consumer sentiment down, -0.15
New home permits were down strongly -0.55
The bottom line: November LEIs (and revisions to October) will net the positive reading of +0.3; however, it is certainly withing the range of error if the weightings are slightly different for the index to go negative. Indeed, had the manufacturing workweek not grown, or had consumer nondurables not turned up, my estimate probably would have been negative.
I have bolded housing permits for an obvious reason: the shocking decline in housing permits and starts almost singlehandedly takes down the whole index for November. While I expect that number is a one-off event and will not be repeated in the next few months, it is a valid number and so the combined mediocre showing for October and November point to a softening economy during the first quarter of 2010.
On the bright side, YoY the LEI will probably be up 4.5% as of November. Simply going sideways this month would make the YoY LEI index up 5.1% this month, consistent with actual job growth in previous economic recoveries.
Europe, China and US report weaker economic data
19 minutes ago
5 comments:
The decline in permits were almost certainly based on the expected expiration of the home-buyer tax credit. However, some of the other leading indicators are weakening which may indicate some economic stagnation.
So what does the LEI mean for job growth in 2010, especially with job claims falling? That downward trend in weekly claims has been nice to see, I hope that doesnt turn around next year.
JJ:
Of course, since initial jobless claims are themselves one of the LEI, the LEI doesn't predict them.
The LEI are predicting job growth going forward for the next few months.
Also, so long as we don't have another bout of deflation, the K.I.S.S. indicator of the bond yield curve 12 months previous also suggests continued growth going forward.
Thanks, NDD. Also, I was wondering, is there any reason to take the recent jobless claims numbers with a grain of salt, given the Thanksgiving holiday, Thurs and Fri? Would that artificially lower the numbers for that week or does the seasonal adjustment take that into account?
JJ:
The seasonal adjustment takes the shortened Thanksgiving week into account.
Hope that helps.
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