First Time Jobless Claims, Exchange Mergers, Night Dragons, and Cranky Dictators

First Time Jobless Claims are first on the agenda, and we may be hard pressed to beat last week's note of optimism. As you hopefully recall, we had seasonally adjusted initial jobless claims of 415,000 (which beat expectations by 10,000), with the unadjusted numbers coming in at 459,683 (down 26,633 from the previous week) but an increase in the unadjusted insured employment level to 4,619,319. The analysts are feeling optimistic, though, and are calling for a 412,000 new claims for the week ending 2/5.

Checking the report from the Department of Labor, it seems that once again the analysts were not optimistic enough. The week ending 1/29 had its seasonally adjusted claims revised upwards to 419,000 (not great, but it still beat last week's expectations by 3000). For the week ending 2/5, seasonally adjusted new claims were 383,000, beating expectations by 29,000. The unadjusted first time claims were 438.548, down 21,000 from last week (not bad at all). The seasonally adjusted insured employment level came in at 3,888,000 (down from last week's revised level of 3,935,250), while the unadjusted level came in at 4,579,513 (also down)[1]. Ten states saw initial claims decline by more than 1000, while only 3 saw new claims increase by more than 1000. So that's not bad at all, and the markets should be fairly happy.

Unless there are a lot of disappointing earnings reports, of course.

Meanwhile, there is an exchange arms race going on, with the status of "biggest in the world" going to the victor. It started with the Australian Stock Exchange looking to get approval to be taken over by the Singapore Exchange, a deal that faces substantial political and regulatory hurdles. Now the London Stock Exchange is looking to buy Canada's TMX, Deutsche Boerse is in talks with the NYSE about a merger, and now other exchanges are jumping on the bandwagon. There is no specific word about what a merger of the NYSE with Deutsche Boerse would mean in terms of regulatory impact on listed US securities (or US member firms, since the NYSE is a SRO), but that will be on the list of things that will have to be resolved before any merger can take place.

According to McAfee Inc, Chinese hackers accessed the computer systems of between five and twelve multinational oil and gas companies to steal bidding plans and other proprietary information. The company declined to identify the five companies they have identified as being compromised by the "Night Dragon" attacks, which depended on exploiting public websites and also on infected emails sent to company executives. McAfee states that they have no evidence that the attacks were sponsored by the Chinese government, but they also do not particularly expect the Chinese government to do anything about the hackers.

The Egyptian government, rather cranky about the United States' amazing political face-heel turn, has expressed concern about the US demands for political change in the nation. "When you speak about prompt, immediate, now - as if you are imposing on a great country like Egypt, a great friend that has always maintained the best of relationship with the United States - you are imposing your will on him," said Egyptian Foreign Minister Ahmed About Gheit. And, from the Egyptian perspective, he has a point. After all, we've spent billions of dollars in foreign aid in helping to prop up Mubarak's military dictatorship for thirty years now, so the sudden demands of the US government to allow actual democracy seem rather... disingenuous.

We now have the official rationale behind the North Korean Crazy[2] walkout on the peace talks yesterday. From the Korean Central News Agency of DPRK;s website, "The south Korean side persists in its nuclear and "human rights" rackets against the DPRK, sticking to its anti-reunification 'policy towards the North' and taking a passive approach towards dialogue.... Groundless accusations against compatriots under the pretext of 'human rights issue' and the like are little short of chilling the atmosphere of dialogue." Yes, that's right. According to Kim "Furry Hat of Power" Jong-un, the failure of the conference is due entirely to the South's unreasonable insistence on talking about human rights [3] and their unreasonable refusal to reunite as a single nation under the Furry Hat of Power[4].

[1] Unfortunately, we have no data on how many people are not counted in insured unemployment through returning to work, versus how many are not counted in insured unemployment through losing benefits. It is probably safe to say that all 39,806 people that fell off the count did not get back to work.

[2] "Don't Hate the Artillery, Hate the South" is yet another disappointing single.

[3] "How dare you claim to judge me for starving my people! My Furry Hat of Power needs food!"

[4] "How dare you not want me to starve your own people as well! Look at my Furry Hat of Power and obey me!"

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.