Friday, January 20, 2012

Notes about this week's data

- by New Deal democrat

Some quick hits about the economic data this week:

1. We still need to take the great initial jobless claims report with a grain of salt. Unadjusted claims were 521,600 vs. 549,600 a year ago, so seasonality is still with us and will be for one more week. Nevertheless, it is harder to make the "imminent recession" argument in the face of such a decline.

2. In addition to initial claims, long leading indicator housing permits continued at 3 year highs for the second month in a row. Another long indicator, corporate Bonds, whether AAA, BAA, or the DJ Corporate Bond index, are within a whisker of all time highs. Money supply is still ample. A short indicator, the stock market, is within 2% of its six month high.

3. On the negative side, the 3 month average of CPI has tipped into deflation. In the past this has meant coincident weakness. Although YoY inflation is down to 3%, that's still higher than YoY wage growth, so real wages are still in decline.

4. While real retail sales for December turned out to be barely positive, both that metric and industrial production are a very small revision away from being negative. These are two of the 4 normally accepted metrics used by the NBER to determine if the economy is in recession or not.

In short, the data is consistent with very poor growth in the last few months, but suggests an improvement in the economy at least after this quarter.