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In a departure from the behavior of most economic statistics of late (when reports were not as good as expected), weekly unemployment claims in the latest period were a bit lower than expected (457K vs. 463K). The 4-week average move up a bit, but the trend since January is downward-sloping (though not by much—see second chart). The pace of improvement may be disappointingly slow, but the economy nevertheless continues to strengthen.
15 comments:
back to your blinkered relentless pointless optimism.
The 52 week moving average of nonseasonally adjusted jobless claims continues to move down.
Today it is at 491,871. It hit its high on October 31 2009 at 576,928.
Key marker is the July 10,2010 number that is the high number for mid year but we have GM not planning its summer shutdown so we
shall see what will be generated.
California continues to lag with 18% of jobless claims a normal percentage is around 13%.
Scott,
Your chart of 10YR yields heading north has fully broken down...
Indeed it has. I keep thinking however that the market's degree of pessimism is way overdone. Things are simply not as bad as a 3.1% 10-yr yield would suggest.
why are you more precient than the entire market?
Septi,
Scott analyzes economic fundamentals by interpreting economic data. The markets are a completely different thing. They can and often do diverge from economic fundamentals. As Scott has documented, the data point to a recovering economy, yet the market is not yet willing to assign a more normal valuation to the increasing earnings stream that a growing GDP brings.
Markets reflect the overall mood of the participants, among other things. Currently the mood is dour. It is a good time for a long term investor to patiently shop for bargains.
Check out weekly rail traffic...
http://mjperry.blogspot.com/
Brodero: Rail traffic is a very impressive indicator of economic improvement. Very hard to argue with hard numbers like these. The upward momentum this creates is going to be very hard to stop. I just have to believe the market is ignoring the significance of these types of indicators.
I am not sure low interest rates are a sign of pessimism. They could be a recognition that the world has plenty of capital--more than can be invested. Rates can drop to zero--if there is too much capital, then you have the choice of overpaying for equities or property, or lending it out.
I think real interest rates go to zero for years on end. If you want security, you will get nothing back except security.
Inflation is dead, dead, dead. Unit labor costs are going down. Explain to me how we have inflation in a competitive economy when unit labor costs are going down. What micro- and macroeconomic models explain that? Property rents are going down too.
At this point, I think the United States should run huge, federal and money-losing lotteries. We run a $100 billion lottery that pays out $400 billion. Don't borrow the money, just print it. Another $300 billion in cash won't cause inflation, but will give real boost to GDP.
Globally, there is about $1 trillion in circulation already.
Benj,
It isn't just pessimism. It is also fear, and pain from short sellers. The treasury market relects investors' desire for safety and liquidity. It is not just a money supply glut. If that were so, high quality stocks would not be so cheap. I have read that the earnings yield of the S&P 500 vs the ten year treasury bond (the spread) is the highest in decades. This reflects a high degree of fear and uncertainty among market participants.
I have been hesitant to accept the premise that our government is a major contributor to this, and that our markets will soon settle down. I am still not convinced but I am beginning to doubt my convictions.
A clairification:
I am doubting my conviction that the government is a major contributor to the fear, uncertainty, and doubt of market participants, not of my longer term convictions concerning our economy. I remain convinced that it is a good time for a long term investor to shop for bargains in a market dominated by fearful and pessimistic investors.
How about taking the 300 billion
lottery money and buying the 1.5 million excess existing homes??
John-
Maybe Obama is as bad as you guys make out. To me, he is just annoying.
Bush jr, with his two debt-financed wars and prescription health care, and ethanol, damaged the Republic more than Obama ever will. Remember? Our financial system collapsed on the Bush watch.
BTW, how bad are things today?
Sometimes we lose perspective.
The top marginal income tax rate in the Nixon years was 70 percent, and the top capital gains tax rate was nearly 40 percent.
The top rate going forward will be 40 percent on income and 21.2 percent on capital gains.
These are the good ol' days for investors.
Yes, I would like a more pro-business administration, and I think the D-Party has made a terrible mistake by casting productive people as villains. Productive people, whether on the factory line or making huge investments in oil fields, are never villians, in fact the opposite.
But if you think one party or the other is actually better for investors...well, I am not so sure.
"Bush jr, with his two debt-financed wars"
I guess Benji watched the people jumping from the towers on 9/11 and then went on about his business. And debt? For real, Benji boy? How's the debt looking with the Democrats running everything?
"and prescription health care, and ethanol, damaged the Republic more than Obama ever will."
Uh, Obamacare?? Are you kidding us?
Ethanol? Your boyfriend is up to neck with ADM and Big Ag in general, as I have repeatedly pointed out.
"Our financial system collapsed on the Bush watch."
And so you give him 100% of the blame like any simpleminded Obama voter would.
"At this point, I think the United States should run huge, federal and money-losing lotteries. We run a $100 billion lottery that pays out $400 billion. Don't borrow the money, just print it. Another $300 billion in cash won't cause inflation, but will give real boost to GDP."
I can see why you voted for Obama, Mr True Economic Conservative. You both love yourself some really inane gimmicks though I doubt your idol Milton Friedman would approve. I just hope the farmers, or any Red Staters don't get any of that cash!
Benjamin,
I certainly agree that the Repubican party has lost its way. Bush's prescription healthcare bill, ethanol subsidies, tarrifs on imported lumber, apples, steel, etc. are all bad policy.
Debt financed wars however are a given. No other way and in fact taking on debt to secure a future that is free of radicalism sounds like sound policy to me. Besides it wasn't the war debt that broght the economy down. GDP grew as soon as the Bush tax cuts kicked in and the deficit shrunk every year until the housing bubble burst.
It was the housing bubble, instigated decades earlier by meddling Democratics looking for ways to buy votes, looking constantly for ways to undermine the true nature of representative government, that caused the current financial condition.
I will agree that there is little difference between Dems and Repubs today, but there is a huge difference between liberals and conservatives.
Bob
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