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Thursday, April 26, 2012

Well, That's A Wrap

Today's weekly unemployment claims report removes any theory of statistical noise. The headline is 388K, which is a 3K rise from last week. Last week's number was revised up to 389K. The four-week MA is at 381,750.

This is still not dire, but it does confirm the negative trends seen in last month's employment report, at least for the time being.

Crude inventories are more positive. I thought I might need them today to offset the weekly claims report. The YoY is -3.6%. Gas is -4.2%; these are four week averages, and holiday driving for Easter/Passover/Spring break moved that gas indicator up previously. The positive implication is diesel (distillate), which is up from last year by 0.1%.

Here, however, we must pause and remember that last year at this time the impact of the Japanese supply line disruption was cutting into the economy, so the YoYs were always going to look better during this period.

CFNAI tells the tale. This month's negative of -0.29 isn't that significant, but these numbers have been trickling down since December, which was strongly positive at 0.65. It's also worth looking at 2011's sequence (a table at the link), which shows what happened to the US economy. From March to April last year there was an abrupt collapse of CFNAI, which was followed by five negatives out of six months. The trough was in August, after which the economy started chugging up the slope again, peaking in December.

Yesterday's durables was interesting.  We've still got strong participation on the industrial side, but more is in investment than in end sales. It does seem as if autos have peaked out, at least for the near term. But on the other hand, the implication of the report is that we have 2-4 months of reasonably good primary manufacturing shipments, which gives us some wiggle room. 

Last year the weakness in production was related to consumers not having money and the Japanese supply line problem. This year it looks to have moved to smaller businesses. In particular the computers/electronics is telling us something about how small businesses are behaving. The strength over the next few months is going to be in primary industry and basically farming, which moves a lot of goods and materials.

We can kiss construction goodbye as a meaningful lifting force. FHA raised premiums again in April, and the bolt to get in the door before that happened gave a brief pop to figures, but the real trajectory is kinda flat.

Here, btw, business confidence plays a large role. I think many businesses are hunkered down and just looking to stay in the black to see what happens. If you are anything related to consumers, concerns over next year's tax increases have to be constraining feckless optimism, especially since real disposable incomes just aren't going anywhere now.

Rail tomorrow will be interesting. Almost all of the controlling factors for whatever is going to happen to this economy through Q3 are already in place. But we don't know enough about those controlling factors to know what will emerge. The end product will be the result of millions of individual decisions.

Update: Forgot to post this. BLS Mass Layoffs for March suggest the weakness may be pretty diffused through the whole service side of the economy. 

Ross Perot was right.
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