MORNING MUSINGS
A bit of mixed data this morning has investors scratching their heads over the next move in the equity market. The index of leading indicators was up by 1% in September. This was the 6th consecutive gain. The largest contributor to the improvement was interest rates which remain accommodative. Jobless claims, on the other hand, continue to reflect the extreme weakness in the economy. Claims jumped to 531K – a truly staggering number for an economy that is supposedly in the middle of a recovery. Continuing claims dropped by 98K which is a clear sign that the ratio of firings to hirings is becoming more favorable.
The most important news of the day was earnings from UPS. The transport company is highly sensitive to the economy and they continue to see signs of stability and a weak recovery at best. CEO Scott Davis had this to say about the recovery:
“I’m encouraged by the signs of economic recovery that are becoming apparent, although we still have a long way to go.
Kurt Kuehn, UPS’s chief financial officer elaborated on their outlook:
“Although there are signs of economic recovery, forecasters predict U.S. consumers will spend conservatively for the holidays this year. Our customers have widely differing views on their outlook for the holiday season. Nevertheless, UPS is primed to handle the seasonal package surge as it materializes.”
On the conference call Davis added:
“It’s got a long way to go to get back to the 2007 levels.”
TPC, do you put any creedance into the trend of falling continuing claims when the extended claims go up at the same time, suggesting perhaps that chronic, long term unemployed are either dropping out of the workforce or just rolling onto extended claims after they exhaust normal benefits?
TPC Reply:
October 22nd, 2009 at 9:23 AM
Jobs are the lifeblood of an economy. I wrote some more detailed notes here on the jobs market:
http://pragcap.com/small-companies-struggling
Continuing claims dropped by 98K which is a clear sign that the ratio of firings to hirings is becoming more favorable.
maybe not — 7,000 people a day are losing their unemployment benefits. I am sure that means that they are showing employed.
TPM, do you give any credence to the “unexpectedly” positive LEI data from the Conference Board today? Or is it simply biased by stock market performance, etc.?
e.g.:
http://www.bloomberg.com/apps/news?pid=20601068&sid=axR0eCguPdJo
TPC Reply:
October 22nd, 2009 at 10:57 AM
Pretty useless. The stock market, confidence data and interest rates make up a huge portion of the data. I don’t know that “leading” indicators of any sort have ever proven more useful than the stock market as a leading indicator and unfortunately, the stock market is not a great leading indicator. Nor is confidence. Interest rates are likely the best indicator in this index and the low interest rate environment of today is forecasting weak growth and deflation…..
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