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Thursday, September 22, 2011

Initial Claims, Unexpectedly

See, these babies unexpectedly rise or fall, depending on how you look at it, but there are too many of them no matter which way you look at it. Last week's figure was initially reported at 428K, which was revised up to 432K. This week's initial figure is 423K. The four-week moving average is now at 421K, up from last week's first-reported figure of 419,500.

Among the bummers here is that it is hard to get much of a drop of unemployment with claims in this range and indeed they are more consistent with increasing levels of unemployment. The 4 week MA for the comparable week in 2010 was only 37K more than this year's.

The 4-week MA for continuing claims was initially reported last week at 3,741,000. This week it is at 3,742,000, but through the magic of upward revisions that is reported as a slight decline. August 27 continuing claims were at 3,729,000. Although the damage is slight, the trend is bad and basically unaffordable with large companies tending to announce layoffs and declines in real average wages.

BLS reports 26 states plus DC having jobless rate increases in August, 12 having drops, and 12 with no change.

The FOMC announcement of Operation Twist (only) seems to have produced substantial selling fervor, most notably in oil. Further bank downgrades haven't helped Mr. Market develop the itch and the twitch in the buying finger. Gold prices are in sync downwards, completing the panic pattern. But the bad news is widespread at this point, with Europe in trouble, China sliding quietly down, India compromised, and many peripheral Asian economies seeing signs of a downward shift

The Fed could not notably improve matters by announcing QE3. It would drive asset prices up, but only temporarily. Mr. Market is quite capable of calibrating prices to spending power and maybe we'd just better let Mr. Market do his work for a while. The reason we are seeing the very strong global coordination is because prices have gotten out of sync with ability to consume (and therefore produce) at these prices. A price fix before the global downturn gets out of hand is the quickest medicine for this malady.

Note: The extent of the global contraction can best be seen in the PMIs, which have taken a remarkable turn for the worse over the last quarter. Markit's flash releases today only confirm the trend, with the Eurozone sliding into outright contraction, and France and Germany continuing expansions, but with declining trends and returns to levels last seen in the summer of 2009. Clearly, these Atlases will not continue to hold up the starry firmament of Euro prosperity. China does not enthuse either, although projections are for continued growth on growth in internal demand. These rates of internal expansion are causing continued inflation, which, if anything, appears to be still accelerating.

PS: The House voted down the spending authorization again. If you listen to the Dem talking points, this is a move by hidebound conservatives. But in fact, almost no Democrats voted for it and quite a few Republicans didn't, so the real picture is more complicated. However the fiscal year is almost over, and something has to be done by the end of September, so this is not going to soothe roiling markets. The debt limit is not a factor now, but spending authorizations (the US hasn't had a budget since the Dems took Congress in 2006) are a necessity also. US Treasury Debt to the Penny.

Further: Reuters article about the "unexpectedness" of the Eurozone PMI result.

With rising unemployment, is the era of "Free Trade"
over ? My guess is that you will see tariffs, not just
To address unemployment, but to address money
velocity here. Money has got to start circulating on
Main Street.
Spork - it's absolutely impossible for me to believe that a lot of countries won't all try to increase exports at the same time.

Many will go to quasi trade protectionist measures.

But overall, you can't raise exports by suppressing world trade. If anything, it seems to be a self-defeating step overall.
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