Thursday, April 11, 2013

Claims back on track

As I noted last week, the jump in claims was bogus, the result of flawed seasonal adjustment assumptions. This week claims fell by more than they rose last week, so claims are back on their declining trend.

At this rate, it won't be long before we see claims fall to 300K per week or a bit less, and that is about as good as it gets for the labor market. The most important thing that claims tell us is that there is no sign of any deterioration in the labor market, and therefore a recession or even a signficant slowdown in growth is very unlikely.

One of the most significant trends in today's labor market is the decline in the number of people receiving unemployment insurance. That is down by over 19% in the past year, or 1.24 million people. This is a powerful trend, since it creates incentives for large numbers of people to seek out and accept employment. Many have no doubt been discouraged in this effort, however, as witnessed by the very weak growth of the labor force—millions have simply "dropped out" and decided to stop looking for a job. But many of those are likely still on standby, ready to re-enter the labor force should job opportunities and other incentives to work improve.


Benjamin Cole said...

Yes, but the total number of employed is not as high as before 2008, and seems glacial in its progress even towards that level.

Something is wrong. I do not believe that 5 percent of our workforce suddenly lost its work ethic. Americans, in general, like to work. We work more hours than other Westerners, we have working couples.

People still cannot find work. Many of my friends are in their mid-50s. They become consultants and hope to make to Social Security. But it is touch-and-go, and of course in your 50s is when your body starts to fall apart. Try finding medical insurance when you are 57.

It is unfortunate that economists at central banks have sinecures, keep their jobs when others cannot find any. The central bank economists can obsess about inflation, give brave speeches about fighting inflation.

That does not do much for unemployment.

Rob said...

Scott, Bill Gross at Pimco has called a new bull market in US Treasuries, based on Japanese investors now looking abroad for higher yields. Do you think this could be as big a deal as he thinks ?

PS: Is that house in the photo yours ?! If so, lucky you and I can see why it might be easier to be more upbeat about life, LOL!

Scott Grannis said...

That used to be a house but it was converted to condos a long time ago.

William said...

With regard to Jim Paulson of Wells Capital article about "Buy and Hold" coming back:

“ of the time of this writing (4/11/2013)....If you had bought the Vanguard Total Stock Market Index ETF (VTI) on October 9, 2007, {the previous market peak}and done nothing other than let dividends reinvest, you'd be up 17.1 percent today.”

William said...

This must be some kind of record change!!

American Association of Individual Investors (AAII) Survey

Week ending 4/10/2013

Bullish 19.3%
down 16.2
Neutral 26.2%
down 10.1
Bearish 54.5%
up 26.3

Long-Term Average:
Bullish: 39.0%
Neutral: 30.5%
Bearish: 30.5%

Gloeschi said...

AAII: useless. The best r squared you get between the level of net bulls and future performance of SPX is 0.01. Test for yourself, take any time period you want. It is absolutely useless information. Sorry.

William said...

Of course, Gloeschi, but at extremes it's a strong contrary indicator. The AAII is just one of several sentiment indicators I look at on a regular basis as well as objective data.

Gloeschi said...

@ William:
"Extremes" are only known ex-post. Was the -15% net bulls in January 2008 extreme bearishness, with SPX at 1,450? So maybe the -25% in February 2008 at SPX 1,326? What about -15% net bulls in January 2009 at SPX 900? Well, it went to 666. Net bulls were -26% in the week of the bear market low (3/12/2009), essentially same as at SPX 1,326.
I am sorry, but if there was some kind of correlation, even if only at extremes, it would show up in the regression plot.
So what other "objective" data and other sentiment indicators are you looking at (since you mentioned them) if I may ask?

William said...

My interpretation of the present AAII data would be that with them so Bearish (54.5%), it is very unlikely that the market will have a correction greater than 10% in the next two months.

The AAII survey along with Schaeffer's Investors Intelligence reading and the Lipper Fund Flows, etc. is enough for me to feel comfortable that the equity market is not at a "top" that I would want to sell.

Gloeschi said...

AAII bulls in the week of the October 2007 S&P high: 31%

AAII bulls in the week of April 4, 2012: 35%.

Doesn't provide any comfort for me.