"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Thursday, November 18, 2010

Jobless Claims, the Philadelphia Fed's Business Outlook Survey, And An Addendum To Yesterday

First, the addendum.

One of my readers, pointed out to me that I may have been a little... one-sided, or perhaps unfair, about core CPI. I'll let him speak for himself, because he put it very well: "As a long term statistical measure of inflation, including statistical outliers does not make sense. The core prices are not as heavily influenced by outside factors such as currency fluctuation, natural disasters, or political pressures as food and fuel. So from the standpoint of helping [the casual reader] understand the significance of changes in CPI, I understand why you'd reference the buying power of someone's paycheck. We can all understand how the price of a tank of gas changes wildly over a 6 month period, this is a given. But from a long term perspective, volatile food/energy prices can lead to a misleading measure of inflation."

I'll go on record as saying that I think the inclusion of the volatile food and energy prices gives a more accurate measure of inflation, but I will also go on record as saying that's one of those things that real economists have been arguing about for decades. So don't feel like you have to accept my opinion. And thanks to the reader for pointing all of this out.

Now. On to the metrics.

First out of the gate are first time jobless claims. These aren't a really huge market mover, not like the Employment Situation report, because all it shows is how many people filed for unemployment insurance for the first time. It doesn't really say anything about how many people left the unemployment rolls (due to finding employment or running out of benefits) or what the unemployment rate is. It's still interesting, because a rising trend is still bad, but it's not an earthshaker.

For the week ending 11/06, we saw 435,000 new jobless claims. Analysts are looking for 445,000 claims for the week ending 11/13 - an upward trend if accurate, but not terrible. The actual results will be near the bottom of the article.

The other metric is the Philadelphia Fed's Business Outlook Survey, also known as the Philadelphia Fed Index. It's a survey of manufacturers in the Philadelphia, New Jersey, and Delaware about general business conditions. The results use zero as a centerline, with anything greater than zero indicating growth and anything below zero indicating contraction. For October we saw a tepid result of 1.0, and for November the analysts are expecting a 5.6 - still weak, but improving. Investors like this because it's considered an indicator of manufacturing sector trends. And growth in the manufacturing sector helps drive growth across the economy.

Look for the Philly Fed Index at 10 AM.

How did we actually do with first time jobless claims? 439,000. That's up from the prior week, but it beat expectations by about 6000 claims. You can see the details in the Department of Labor's official report.

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