Thursday, July 18, 2013

Claims continue to decline

The above chart compares the unadjusted claims data from this year to the same dates last year. Claims in recent weeks are running about 10% below claims from the same date last year. June claims typically rise because of temporary retooling layoffs at auto plants.

The number of people receiving unemployment compensation is down 21% from the same time last year, a trend that has been in place for more than three years. As I've been saying repeatedly, this is one of the biggest and most positive changes on the margin in today's economy, since it involves changing the incentives of millions of people—encouraging them to find and accept a job offer. 

This chart shows the seasonally adjusted level of claims, which are down 10% from year-ago levels.

Claims data is timely and not subject to significant revisions, and so far there is no sign of any deterioration in the health of the economy or the jobs market. This has major implications for those who hold cash in anticipation of a deterioration in the economy. Given the almost zero yield on cash and the much higher yields available in alternative investments (see chart below), holding cash as a hedge against a weaker economy is an expensive proposition—and so far a losing one.

As long as the economy fails to deteriorate, the prices of risk assets are likely to continue to rise as the world attempts to reduce its (relatively large) holdings of cash in favor of higher-yielding investments.


William McKibbin said...
This comment has been removed by the author.
William McKibbin said...

Declining unemployment claims is probably best accounted for by the spike in suicides in America -- the two measures are strongly correlated at this point -- more at:

Cris Sheridan said...

Hi Scott,

I really like the analysis, data, and perspective you offer. Do you allow any republication of your work on other sites (with full attribution of course)? If so, I would love to know whether we could do so on Financial Sense. If you would like to discuss this more, please contact me at or at work 858.487.3939. We're actually just down the coast from you in San Diego. Looking forward to hearing from you.


Benjamin said...

Slow improvement, too slow.

A reasonable concern: Recoveries do not last forever. What if enter the next recession, and we still are in slo-go, super-low inflation land?

We will slip into deflation and recession. Call it "decession."

William McKibbin said...
This comment has been removed by the author.
William McKibbin said...

@Benjamin, only Federalism is "recovering" today, including the military-industrial complex, the medical establishment, Wall Street, and Federal workers -- the rest of the nation is mired in economic depression as evidenced by persistent long-term declines in real working wages, real home values, and the employment to population ratio -- we need to all accept that only the industries listed above matter at this point -- Federalism will do whatever it must to ensure prosperity in these "Federal" industries -- everyone else is cannon fodder for Federalism, period.

My advice to the 99% crowd is to join the 1% crowd by acquiring world-class skills that earn premium wages that convert into dividend and rent-earning equities over a lifetime -- but under no circumstances should the ambitious lose sight of the reality that the 99% crowd is expendable in America -- that's reality at this point.

We need to give up on the 99% crowd and their misery, and focus on how people can join the 1% club and its joys -- the strategy above is my best advice toward that end for the huddled masses.

The 99% crowd in America have always been downtrodden -- they just don't know it...

William McKibbin said...

PS: Only 1% of Americans are financially independent -- that's reality -- always has been -- always will be...

Gloeschi said...

Scott: I think you would do yourself a favor if you gave up that Wall-Street-mantra of "cash on the sidelines". I have tried to explain this to you several times, so here it is one more time:
If I feel I have too much cash, and I want to be in the stock market, I need a seller. Now that seller has the cash.
When I buy stocks, the cash does not disappear.
Somebody always has to hold the cash, and somebody also has to hold the shares.
In aggregate, investors cannot get rid of cash. To suggest otherwise is ridiculous.

Scott Grannis said...

Note that when referring to the relatively large amount of cash that is currently being held (e.g., bank savings accounts, as reflected in the historically high ratio of M2 to nominal GDP) I always refer to "attempts" by the public to reduce their cash holdings. Obviously cash cannot just disappear (although currency can be returned to the Fed in exchange for bank deposits). But "attempts" to reduce cash holdings have the effect of bidding up prices of non-cash assets. As the price of non-cash assets rises, this reduces the amount of cash that the public holds relative to other things; the existing stock of cash becomes a smaller part of the public's portfolio. That is how "cash on the sidelines" can boost the price of risk assets when and if the public decides that its cash holdings are too large.

William said...

ECRI Weekly Leading Index (WLI)Rises

A measure of future U.S. economic growth strengthened in the latest week to its highest in more than two years, while the annualized growth rate also edged higher.

The Economic Cycle Research Institute said its Weekly Leading Index rose to 131.2 in the week ended July 12 from a revised 130.1 the prior week.

The index's annualized growth rate strengthened to 4.5 percent from the previous week's revised 4.3 percent.

William said...


Weekly 07/17/2013

Equity Fund Inflows $16.6 Bil;

Taxable Bond Fund Inflows $3.8 Bil.

xETFs - Equity Fund Inflows $3.7 Bil;

Taxable Bond Fund Inflows $3.4 Bil.

Scott Grannis said...

Re ECRI. Hasn't it been almost two years since they said a recession was imminent?

William said...

Hello, Scott -

You are correct. In the fall of 2011, ECRI said that a recession {to be determined in retrospect by the National Bureau of Economic Research (NBER)} would begin no later than mid-year 2012 but that most economists wouldn't recognize the recession until the end of 2012.

Unknown said...

"My faith in the American resurgence is undiminished, but when almost $20,000,000,000 flows into stocks in a single week in one country, it’s probably time to sneak out back for a smoke."
-Garth Turner

William said...

Dr. Ed Yardini, July 22:

"In his prepared testimony, Bernanke said that “if a substantial part of the reductions in measured unemployment were judged to reflect cyclical declines in labor force participation rather than gains in employment, the Committee would be unlikely to view a decline in unemployment to 6-1/2 percent as a sufficient reason to raise its target for the federal funds rate.

Wow, that’s an important statement! It’s not hard to see that all of the drop in the unemployment rate so far can be attributed to the decline in the participation rate. I constructed three hypothetical time series showing the total number of unemployed workers by subtracting actual employment from the civilian working-age population multiplied by labor force participation rates of 63%, 65%, and 67%. This analysis shows that nearly all of the 3.6 million drop in unemployment from the peak at 15.4 million during October 2009 through June of this year can be explained by the drop in the participation rate from 65.0% to 63.5%. The same can be said for the drop in the unemployment rate from its most recent cyclical peak. Currently at 7.6%, it would be at 9.7% if the participation rate were 65%.

theyenguy said...

You wrote, The market was initially spooked by the prospect of a QE unwinding, but now has put those fears to rest.

I've been reading John The Revelator, specifically Revelation 13:1-4. And I've been reading Witness Lee on the Economy of God, specifically Ephesians 1:10, and my fears of a soon coming Financial Apocalypse have been heightened

The days of risk on investing, ONN, are over, though, done, and finished. Small Cap Pure Value, RZV, and Biotechnology, IBB, both traded lower today from market highs.

The short selling opportunity of a lifetime has developed. Look for strong derisking to come out of fiat asset invesment leaders, XIV, FDN, CARZ, PBS, IGV, IBB, RZV, PSCI, PBD, PPA, IAI, SPHB, SMH, XRT, PJP, EWN, PSP, UJB, KRE, TAN, RXI, WOOD, FLM, LNKD, RF, LYG, SMFG, BPOP, SLM, JPM, NNI, UBS, BLK, NMR, MKTAY, seen in this Finviz Screener ...

The slight trade lower seen in the chart of the S&P 500, $SPX, SPY, to $1,692, very likely reflects a market high yesterday Monday, July 22, 2013, at 1696, as an Elliott Wave 5 High, as S&P High Beta, SPBH, traded, 0.3%, lower today, and, S&P Transports, XTN, traded 1.2% lower, today. Large Cap Financials, JKF, including Life Insurance companies, such as, PRU, seen in this Finviz Screener, rose to new rally highs, suggesting that a market top in the S&P 500 has been attained. S&P overweight Exxon Mobil, XOM, traded to an all time new high of 95.

Jesus Christ, operating in the economy of God, that is the political and financial administration plan of completing every age, epoch, era and time period, bringing forth its total fufillment, likely pivoted the world fully out of the era of investment choice and into the age of ditkat, today July 23, 2013; a process which He began on May 24, 2013, when the Interest Rate on the US Ten Year Note, ^TNX, rose strongly to 2.01%, serving as an “extermination event” which terminated Liberalism and introduced Authoritarianism; this rate rose again today from its recent low of 2.49% to 2.52%.

Volatility, ^VIX, finally rose. The walking dead market, that is the zombie market is likely over. Liberalism’s schemes of credit liquidity, AGG, FLAT, and carry trade, ICI, funded safehaven investing probably came to an end today, Tuesday, July 23, 2013. The safe haven rally in US Based stocks appears to be over, as the premium of Biotechnoloy over Emerging Markets, seen in the chart of IBB:EEM, has exhausted. And the safehaven rally in the Netherlands, EWN, appears over as its Electronic Equipment Manufacturer, PHG, and its Scientific Instrument Manufacturer, ST, traded lower. And the safehaven rally in Design Build Companies, FLM, appears over as its leader, JEC, traded lower. And the safe haven rally in Leveraged Buyouts, PSP, appears over as two of its leaders, IP, and GE, traded lower. There now be no more safe haven investments from the terror of bond vigilantes calling interest rates higher globally and the currency traders following suit with competitive currency devaluation.

The rise of Authoritarianism’s schemes of debt servitude, such as Greek Bailout III, and the Cyprus Bank Deposit Bailin, mean that wealth can only be preserved in the physical possession of gold bullion, or in Internet trading vaults such as Gold Is Money or Bullion Vault.

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