Macro Minute

Lots of informative data today so let’s take a quick look at the big picture here.

Today’s Philly Fed Survey came in hot at 19.8.  That’s on the back of a moderately positive industrial production report and the strong NY Fed report.  This brings the composite real-time index up to 16.9 which is its best reading since February 2012 (see figure 1).  The 3 month moving average is at 11.8 which is the highest reading since May of 2012.  Manufacturing in the US might just be picking up a bit of momentum.

The jobless claims data also showed a continued positive trend.  As I’ve mentioned many times in the past, this continues to be one of the best real-time indicators of the economy’s overall trend.  The latest reading of 346,000 is actually pretty flat relative to recent readings, but the good news is that the data doesn’t appear to be deteriorating.  Jobless claims always spike before a recession so this continues to point to an okay environment.

Overall, there’s not much different here from what we’ve been seeing for years.  Growth is extremely modest and corporations are able to maintain margins with meager revenue growth and careful cost management.  It looks like the equity market is in a Fed obsessed multiple expansion phase which might not make a lot of sense to most, but until the equity market has a reason to instill some sustained fear in people then the path of least resistance continues to be up.

Charts via Orcam Investment Research:



(Figure 1 – Composite Real-Time PMI)


(Figure 2 – 4 Week Avg Claims)



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Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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  • jswede

    which PMI/Fed Manufacturing Indices do you include in your ‘composite’?

    Mine reads a little differently…. slightly anyway.

  • Cullen Roche

    I am using the regional surveys.

  • John P.

    Cullen the un-adjusted weekly jobless claims went from 383K to 409K, but due to the miracle of seasonal adjustments you get a 24K decrease. How in the world can you trust those numbers.

  • Frederick

    It looks like private investment is bearing the load now as the government’s deficit shrinks. Just as you expected.

  • jswede

    right – the KC, Philly, Richmond, Dallas Fed surveys… do you include the Chicago or Milw ISM’s ?

  • bart

    Watch what next week and the week after show. The seasonal adjustment factor drops to 98.6 and then to 85.8 from this week’s 122.2.

  • Conventional Wisdumb


    The year over year change was a decrease in the NSA data. The seasonal factors at this time of year are very aggressive but the y/y trend was positive in terms of lower numbers with a very similar seasonal adjustment.

    You can see the seasonal factors here:

  • jswede

    1st/2nd week of July always has a spike in NSA, and this is adjusted away… interestingly, in the last few years have started a trend of *over*adjusting the 1st/2nd weeks data – at least in looking at the recent years’ July SA trend. Over the last 5 years, we’re seeing a dip in this week(s) SA (headline) reading, followed by a jump in the next week… we saw that in 4 out of the last years.

    fwiw, the Seas Adj to the rest of the summer is UP, with an average of around 70k claims ADDED to the NSA claims number. Last year, NSA was in the very low 300k’s late July-Sep, but the headline read in the ~370k’s.

  • Detroit

    Detroit just went bankrupt….Let us know what you think Cullen?

  • CharlesD

    Hi Cullen. You make the statement “corporations are able to maintain margins with meager revenue growth and careful cost management”.
    Wait. You have educated us about the “Kalecki equations” which show that profits are a function of revenues received without associated costs(from investment and deficits of the government, the consumer and other countries). Thus profits have nothing to do with “cost management” – at the macro level. This is because one business’s lower costs is another business’s lower revenue – so it’s a wash in the big picture. Am I missing something?

  • Incognito
  • Pantmaker

    The driver of the equity markets now is an equal parts Pavlovian/Superstition reaction to the words of a bearded man who has intentionally crushed the ability of the elderly and retired to earn a decent return on their savings. Corporate growth, earnings and employment statistics no longer have anything to do with market valuations. I always chuckle when I hear “Multiple expansion” mentioned somewhere. I think it’s usually just a fancy way of saying look out below.

  • Conventional Wisdumb


    Yes I find it interesting. For something so common it is uncommonly misunderstood :)

    I didn’t clue into how this was done until about 2 years ago and it is indeed useful info from an investor’s point of view.

    I am still puzzled as to why we even need to provide seasonal adjustments. Why not just let the mkt figure it out using their own analysis? We are no longer computing challenged and it would get rid of all the conspiracy theory thinking when it comes to the data.