First Time Jobless Claims

It's been a few days since I got one of these out, but I couldn't miss today.  It's Thursday!  And that means unemployment!

 

Last week, we nailed expectations dead on.  The analysts expected an adjusted 405,000 new claims for the week ending 7/9, and that's exactly what they got.  The unadjusted number of initial claims came in at 470,671 (up 53,873), and the total number of people claiming benefits in all programs for the week ending 6/25 hit 7,484,894 (up 25,333).

 

The Econoday-surveyed analysts aren't feeling as optimistic for the week ending 7/16.  They're calling for - no, not 420,000 - they're calling for 415,000 initial claims for the week.  And lo!.  It is 8:30, and time to check the actual results.

 

Looking at the Unemployment Insurance Weekly Claims Report, the first thing that we see is that - once again - the previous week's initial claims figures have been adjusted upwards, to a level of 408,000[1].  The (unreliable, based on recent statistics) advance figure for seasonally adjusted initial claims for the week ending 7/16 then comes in at 418,000 - missing expectations, but not by a terrible margin.  The unadjusted number of initial claims comes in at 464,865, a decline of 5,806.  For the week ending 7/2, the total number of people claiming benefits in all programs was 7,325.198, a somewhat depressing decline of 159,696[2]

 

[1]  If you're playing the home game, this means that the figures have now been adjusted upwards in 17 of the last 21 weeks.

[2]  Depressing?  Yes.  We only saw 18,000 new jobs added - in total - for the month of June.  So, 159,696 people stopped claiming unemployment benefits in the last week of a month that only added 18,000 new jobs.  Which means that, playing the averages, 155,196 of the people no longer claiming benefits are doing so because they have run out of benefits.

World News!

Afghanistan

• Ten thousand US troops have left Afghanistan, as the first wave of a drawdown that aims to bring about a third of the 100,000 soldiers stationed there home.
• In the realm of "genuinely good news," a population of snow leopards has been found in northeastern Afghanistan's Wakhan Corridor.  Only between 4500 and 7500 of the cats are known to survive in the wild.

European Union

• The results of the EU stress tests on 90 major European banks are due out at 1600 GMT, and are expected to show that one bank in six has insufficient capital to withstand a prolonged recession.

Indonesia

• Mount Lokon, a volcano on the Indonesian island of Sulawesi, has begun to erupt.  A two-mile evacuation zone has been established around the volcano, but only 4400 of the 28,000 people who live within the zone have been evacuated.

Italy

• The Italian Senate has passed an austerity budget, containing some $67 billion in spending cuts over the next three years with a goal of having a balanced budget by 2014.  The measure must now pass the lower house.

Japan

• Meat from eleven cows from a farm outside the Fukushima no-go zone has been found to be contaminated with up to six times the legal limit of cesium.  The farmer that raised the animals has admitted that he fed them hay exposed to radioactive fallout.
• Territorial disputes with South Korea over two islands in the Sea of Japan (the Koreans call them Dokdo, the Japanese call them Takeshima), have led to the Japanese government instructing its diplomats to boycott Korean Air.

Libya

• The fourth meeting of the Libya Contact Group - aka, NATO and Arab diplomats - is being held in Turkey to discuss the next phase of operations in Libya.  The meeting will look at ways to put more pressure on the Libyan government, and at a progress report on the rebel plans for making a transition to a democracy.
• As part of the pressure on the Libyan government, the UK is deploying four more Tornado fighter/bombers to the region.

Mexico

• The Mexican army has found a 300 acre marijuana plantation in Baja California, the biggest ever found in that country.    The street value of the crop is estimated at $160 million dollars (that's roughly $9.53 fillion dollars, or a $533,333.33 per acre).

Switzerland

• Credit Suisse has become the target of a US Department of Justice investigation into banks suspected of helping americans evade taxes.

Syria

• "Security forces" fired on protesters in Idlib, killing three.

United States

• In the wake of yesterday's announcement by Moody's, Standard & Poor's has warned that there is a 50% chance it will cut the US sovereign debt rating this month if there is no agreement on the debt ceiling.  Substantive agreement.  "If you get a small agreement," said John Chambers, the chair of S&P's sovereign ratings committee, "that will lead to a downgrade."
• The Pentagon has acknowledged having suffered a significant breach in security as the result of a hacker attack in March.  Deputy Defense Secretary William Lynn said they have "a pretty good idea" who launched the attack, but did not name names.  Some of the stole data was "mundane, like the specifications for small parts of tanks, airplanes, and submarines.  But a great deal of it concerns our most sensitive systems, including aircraft avionics, surveillance technologies, satellite communications systems, and network security protocols."

CPI

Who wants some inflation?

 

Realistically, nobody.  But everybody talks about it, and everybody worries about it, and everybody is waiting for the floodgates to open for the massive quantities of liquid cash injected by the Federal Reserve to begin driving inflation up and up.  The Street worries about inflation because, if it begins to go up, the Fed will have to start tightening and that would mean the end of the (comparatively) easy credit environment.  Also, inflation grinds away at the domestic purchasing power of the dollar, causing consumer spending and to dry up and corporate spending to slow down, both of which cripple GDP.

 

So nobody wants inflation, and everybody watches the CPI-U.  And last month, we watched the May numbers with dread in our hearts as we completely missed expectations.  CPI-U (also known as "headline inflation") was up 0.2%, with the core CPI-U (the inflation the Federal Reserve watches) up 0.3%.  For the rolling year, CPI-U was up 3.6%, core CPI-U was up 1.5%, food CPI was up 3.5%, and energy CPI was up 21.5%.

 

Undaunted, the Econoday-surveyed analysts predict great things for the month of June.  They're calling for a 0.2% decline in headline inflation, and "only" a 0.2% increase in core inflation.  Are they right.  Let's check the Consumer Price Index Summary from the Bureau of Labor Statistics, and find out.

 

And it turns out that they were half right.  CPI-U declined 0.2% in June, but the core CPI-U increased 0.4%.  It's reasonable to assume that the overall decline in headline inflation derives from food and/or energy, and it turns out that this is an accurate assumption.  Food CPI increased 0.2%, but energy CPI declined 4.4%.  This puts the annual CPI-U at 3.6%, core CPI-U at 1.6%, food CPI at 3.7% and energy CPI at 20.1%.

 

To put this in perspective, here's an interesting accounting trick.  If you divide 72 by an annual rate of increase, you find out how many years it takes to double something.  If you're looking at an investment, it's roughly how many years it takes your investment to double.  If you're looking at inflation, its how many years it takes costs to double.  So, based on the rule of 72, the fixed basket of goods and services measured by CPI-U should double in cost every 20 years.  Food costs should double every 19-20 years, and energy costs should double every 3.5 years (with gasoline doubling every 2 years).

Producer Price Index News Release

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The latest Producer Price Index news release (http://www.bls.gov/news.release/pdf/ppi.pdf) was issued today by the Bureau of Labor Statistics. Highlights are below.
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The Producer Price Index for finished goods decreased 0.4 percent in June, seasonally adjusted. This decline followed increases of 0.2 percent in May and 0.8 percent in April. Prices for finished goods less foods and energy moved up 0.3 percent.

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First Time Jobless Claims

And finally, in our bumper crop of market data, we have First Time Jobless Claims.

 

Last week, I had a little fun with the analyst predictions that there would be 420,000 new claims for the week ending 7/2, pointing out that this same number had been predicted for several weeks in a row.  When we got the actual results, it turned out that the advance figure for seasonally adjusted initial claims for the week ending 7/2 came in at 418,000, beating expectations by 2000.  The actual initial claims for the same week were up 13,514 to a level of 416,798, and the total number of people claiming benefits in all programs for the week ending 6/18 fell 52,052 to a level of 7,459,561.  So, if you don't look at the actual figures, that wasn't too bad.

 

Also, you want to not think too hard about the fact that the total number of people claiming benefits in all programs fell 52,052 in one week of a month that produced only 18,000 new jobs.  That makes it hard to really get behind the excitement over beating expectations last week.

 

For the week ending 7/9, the Econoday-surveyed analysts are rather more optimistic.  They aren't predicting 420,000 initial claims for the week.  No, they're calling for "only" 405,000 initial claims.

 

For the actual results,w e go now to the US Department of Labor's Unemployment Insurance Weekly Claims Report.  Right out of the gate, we see that last week's expectations-beating 418k new claims has been revised upwards - by a substantial 9000 - to 427,000.  That's not great news, and it's the sort of thing that makes you question the accuracy of their report that the advance figure for seasonally adjusted initial claims for the week ending July 9 is only 405,000 (which does nail expectations dead on).  I mean, not to put too fine a point on it, the advance figures have been revised upwards for 16 out of the last 20 reports.  That sort of thing somewhat shakes my faith in their advance figures.

 

But those figures are the only figures we have to work with, and they're the figures everyone gets excited about.  So lets call this "meeting expectations" and get on with life.  The advance unadjusted number of initial claims for the week ending 7/9 comes in at 470,671 - an increase of 53,873.  Finally, the total number of people claiming benefits in all programs for the week ending 6/25 rose 25,333 to a level of 7,484,894.

Retail Sales

Next in our fine harvest of market data comes Retail Sales - the US Census Bureau report about the changes in total receipts at stores that sell durable and nondurable goods[1].  This is another of those reports that gets the analysts all excited.  The Street likes increasing sales, because that means increasing corporate revenue, which (hopefully) means increasing corporate profits.  The Street also likes seeing the economy working and increasing GDP.  Unless they're short the Wilshire 5000 or something crazy like that.

 

Anyway, May was anticipated to be soul-crushingly bad.  The analysts proved to be wrong in this, because May was just mixed.  Overall retails sales declined 0.2%, but increased 0.3% ex-auto.  In the wake of that, the Econoday-surveyed analysts have apparently decided to work on the theory that "if you expect nothing you won't be disappointed".  They're calling for a 0.0% change in overall retail sales, with a 0.1% increase in ex-auto retail sales.

 

So let's hit the Advance Monthly Sales for Retail and Food Services June 2011 report, and see what actually happened.  And what happened is that we beat expectations, with retail sales increasing 0.1%.  That deserves a "yay" for beating expectations by a tiny amount.  We also beat expectations looking at the ex-auto figures, showing a 0.2% increase.  Again, "yay".

 

I joke, obviously.  It really isn't a huge amount, but it is still better than missing expectations.

 

Anyway, building material & garden equipment and supplies dealers had the best month, with a 1.3% increase in sales.  That seems to make sense, since a) June is a good month for gardening and building and working outdoors, and b) we've got a lot of areas trying to recover from floods and tornados and wildfires that happened in May and June.  You rather need building materials for that sort of thing.  Furniture and home furnishings stores had the worst month, with a 0.8% decline in sales.

 

[1]  Physical products.  Things you can touch, handle, manipulate, eat, and so forth.  There are also intangible goods, which are actually services.

Producer Price Index

We have a bumper crop of market data today!.

 

Starting us off (because it's the one I clicked on first - all three reports actually come out at the same time), we have the Producer Price Index.  This is, of course, a measure of inflation as it impacts producers and manufacturers at all stages of the process - raw materials, intermediate goods, and finished products.  Increases in PPI don't always correlate into a 1:1 increase in CPI, there are a number of other factors to consider[1], but it is considered a definite indicator of the direction of inflation.

 

May's figures weren't bad at all.  PPI for finished goods rose 0.2%, which missed expectations but not by a whole lot, and the core PPI for finished goods rose 0.2% as well.  PPI for finished food fell 1.4% (on a 12.2% decline in fresh and dry vegetable prices) and PI for finished energy rose 1.5% (driven by a 2.7% increase in gasoline prices).  PPI for intermediate goods rose 0.9%, and PPI for crude goods fell 4.1% (mostly on a 4.7% decline in the cost of copper).

 

For June, the Econoday-surveyed analysts are expecting a 0.3% decline in PPI for finished products, driven by declines in food and/or energy - core PPI for finished products is expected to increase 0.2%.

 

Are they right?  We turn to the Producer Price Indexes - June 2011 news release from the Bureau of Labor Statistics to find out.  And what we find out is that they are wrong, but in a good way.  The PPI for finished goods decreased 0.4%, beating expectations.  On the other hand, we missed expectations on the core PPI, which rose 0.3%.  All of this was driven by a 2.8% decline in the cost of finished energy (which was driven in its turn by a 4.7% decline in gasoline prices).  PPI for intermediate goods remained flat, with a change of 0.0%, again driven by a decline in energy costs (0.8%, helping offset a 0.4% increase in intermediate foods and feeds costs).  PPI for crude goods fell 0.6%, also driven by energy (which fell 4.1%, helping to offset a 2.1% increase in crude foodstuffs and feedstuffs).

 

So far, the morning is looking up.

 

[1]  Like manufacturers asking themselves questions like "If I pass these costs on to my buyers, will they simply stop buying?"