Initial Weekly Unemployment Claims (4-Week Moving Average) thru Week Ending April 11, 2015 – Easy Trends

In this article, I’ll do an “Easy Trends” analysis of the initial weekly unemployment claims data.  “Easy Trends” is a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis.  Please visit my latest unemployment claims trend analysis for more info.

Quick ‘n Easy

By tracking the number of people who are filing for unemployment benefits for the first time each week, we get a quick insight into the latest status of the economy’s health.  Fewer claims equals more jobs, which equals more income, which usually equals more consumer spending (70% of the economy!) that supports company profits, which in turn can lead to more hiring.

Quick Version of Easy Trends Analysis

For the Initial Weekly Unemployment Claims series, I will be doing only a brief update as long as the level of claims is super low (below 300,000) or just low (below 350,000) but without a confirmed upward trend (which is undesirable of course). I will only call out a few specific statistics that I like to track. I’ll be tracking the trends, but it takes a lot of time to do the post, so I won’t do a post with the full analysis unless there is any cause for concern. Bottom Line: If you’re seeing my “quick version” of this analysis – don’t be worried about weekly jobless claims!

NOTE: The last time I did a full update was for the week ending March 7, 2015

4-week moving average of weekly initial unemployment claims: 282,750   (Good – we want this number to be below 350,000)

4-week moving average of weekly initial unemployment claims as a percent of the total size of the nation’s workforce: 0.18 percent   (Good)

Current Trend: Confirmed downward trend of about 8,250 fewer claims per week, but latest reading too high to include.   (Good)

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Industrial Production – Easy Trends (thru March 2015)

Let’s talk about industrial production, its importance and the current trends. I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither. You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis. Please visit my latest industrial production trend analysis for more info.

Quick ‘n Easy

Industrial Production (IP) measures how much is being produced by factories, mines and utilities. The changes in IP track very closely with changes in the overall economy.

First, a nice summary of what Industrial Production (IP) is from Econoday:

The index of industrial production shows how much factories, mines and utilities are producing. The manufacturing sector accounts for less than 20 percent of the economy, but most of its cyclical variation. Consequently, this report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.

Easy Translation: The first sentence is probably enough for an understanding – what’s being produced at factories, mines and utilities. The second sentence is a key detail though. Because it relates to manufacturing, and manufacturing is only about 20 percent of our economy, at first glance one might consider this indicator not important. But the changes in the manufacturing sector track the changes in the economy extremely well. In other words, the cycles of the two are well matched, making IP incredibly important to track.

Here’s a ten-year chart of the Industrial Production Index from the Federal Reserve Bank of St. Louis (a level of “100” represents the level in 2007):

Industrial Production Index - March 2015 - FRED

Source: StLouisFed.org

Industrial Production Trends and Projections

Below, I will discuss whether industrial production is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. I generally start my analysis from 3 years ago. continue reading…

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Economic Indicators Roundup (April 13, 2015)

Economic indicators are everywhere, so this is kind of like a dashboard that I like to follow.  For each indicator, I will try to give you a brief description, the latest reading and what I understand to be its implications.  For simplicity, I will assign each a rating of positive, neutral or negative.  For the economic indicators, I will denote in each one’s section how I decide which rating to give it.  At the end, I assign an overall rating, but this is just to guide me in my takeaway of where things stand.  It’s not scientifically rigorous or anything.

  • Positive – indicative of a healthy, growing economy.
  • Neutral – indicative of a slow or no growth economy but not a contracting (recession) economy.
  • Negative – indicative of a shrinking economy or recession.

(NOTE: For a “Quick ‘n Easy” read, just review the labeled white boxes, then skip to my “Easy Take” summary at the end.  You can review any charts/graphs afterward.  I want to make sure no one is intimidated by the length of my posts, even though I’m trying to making them easy …)


Quick Summary

Indicator (Click for details – only works if full article is open) Current Rating (change from previous roundup)
GDPNow (GDP Forecast from Atlanta Fed) Neutral
ADS Business Conditions Index Neutral   (Downgrade)
Bloomberg Financial Conditions Index Positive
Daily Consumer Leading Indicators Negative
Citigroup Economic Surprise Index Negative
Employment Trends Index Positive
Chicago Fed National Activity Index Neutral
Easynomics Real Estate Price Stability Index Positive
Easy Trends Dashboard   (min/max -3 to +3) +2.33 = Definitely moving in a positive direction, but caution is being signaled in at least one area

NOTE: You may be reading an outdated analysis.  Please visit my latest economic indicators roundup.



Economic Indicator: GDPNow   |   NEUTRAL
Easy Intro: None yet   |   Link to Source   |   Latest Date This Info Represents: 1st Quarter 2015 (i.e., three months ending March 2015)

Quick ‘n Easy

The current forecast for real GDP growth in the 1st quarter of 2015 is 0.2 percent – well below-average growth by historical standards, almost no growth! The Federal Reserve Board of Atlanta combines a whole bunch of public data to mimic what the government does when reporting Gross Domestic Product (GDP), which is the broadest and most comprehensive measure of the economy that is widely accepted. It basically measures the value of all goods and services produced in the country, regardless of industry. In a sense, that’s what economics is all about, the value of things. The rate at which GDP is growing tells us whether our economy is strong or not. Historically, the average has been about 3.3 percent per year. It would be great to see at least that rate of growth.

Economic Indicators - GDPNow from Atlanta Fed - Mar 30 2015

Source: FRBAtlanta.org

Easy Description: GDPNow is a frequently updated estimate of the growth rate of the economy (GDP growth) as opposed to having to wait for quarterly estimates from the Bureau of Economic Analysis for “official” figures.

Latest Readings:

1st Quarter of 2015: On Mar 30, GDPNow is positive (+) 0.2 percent annualized growth rate (versus +0.3 percent on Mar 17)

NOTE: “Annualized growth rate” is how much growth we would see over a full year if economic growth continued at the same pace as it did in the latest quarter being forecast.

Implications: After an overall year of sluggish growth in 2014 (mostly due to a weather-impacted 1st quarter that was negative), the 1st quarter of 2015 is projected to show barely any growth at all! Hopefully, we will see the same thing we saw last year where growth rebounded big time in the 2nd quarter and steadied the rest of the year.

Additional Info: This is a relatively new indicator, so my use of it here may evolve over time. I like it because it provides a very comprehensive and more timely update for overall economic growth.

Easynomics Rating Methodology: For this index, I will use data on the most recent quarter available. If the latest GDPNow estimate refers to a quarter for which there is already an official BEA reading, then I will go with the BEA reading. I will rate anything between zero and (+) 3.3 as “neutral” – anything above or below that will be rated “positive” or “negative” respectively.

continue reading…

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Initial Weekly Unemployment Claims (4-Week Moving Average) thru Week Ending April 4, 2015 – Easy Trends

In this article, I’ll do an “Easy Trends” analysis of the initial weekly unemployment claims data.  “Easy Trends” is a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis.  Please visit my latest unemployment claims trend analysis for more info.

Quick ‘n Easy

By tracking the number of people who are filing for unemployment benefits for the first time each week, we get a quick insight into the latest status of the economy’s health.  Fewer claims equals more jobs, which equals more income, which usually equals more consumer spending (70% of the economy!) that supports company profits, which in turn can lead to more hiring.

Quick Version of Easy Trends Analysis

For the Initial Weekly Unemployment Claims series, I will be doing only a brief update as long as the level of claims is super low (below 300,000) or just low (below 350,000) but without a confirmed upward trend (which is undesirable of course). I will only call out a few specific statistics that I like to track. I’ll be tracking the trends, but it takes a lot of time to do the post, so I won’t do a post with the full analysis unless there is any cause for concern. Bottom Line: If you’re seeing my “quick version” of this analysis – don’t be worried about weekly jobless claims!

NOTE: The last time I did a full update was for the week ending March 7, 2015

4-week moving average of weekly initial unemployment claims: 282,250   (Good – we want this number to be below 350,000)

4-week moving average of weekly initial unemployment claims as a percent of the total size of the nation’s workforce: 0.18 percent   (Good)

Current Trend: Confirmed downward trend of about 8,500 fewer claims per week.   (Good)

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Stock Market Fair Value – What S&P 500 Should Be (Beginning of April 2015)

At the beginning of each month, I will talk to you about something called stock market fair value. It’s not something I want you to use to make immediate changes in your investment portfolio. Very rarely does anyone or any system provide you instant wealth like that, so be very skeptical if anyone makes such claims.

NOTE: You may be reading an outdated analysis. Please visit my latest Stock Market Fair Value article.

Stock market fair value relies on a concept called “market valuation” and refers to the process of figuring out what the stock market should be worth. By that, I mean what the level of the S&P 500 should be. That is a broad measure of the value of the stocks of the 500 largest companies. If there’s anything that is constant in the markets, it’s that there will be ups and downs. But over the long run, there are some things that generally hold true.

For more details on the information I present in this post, go to Easy Intro to Stock Market Fair Value. You could also just read this post for the bottom line on whether the stock market right now is “cheap” or “expensive” relative to a fair price. Keep in mind that these deviations from a market fair value price can last a long, long time (months or years), so don’t go and tweak your portfolio every month based on this information. Instead, use it to adjust your long-term expectations for the purpose of financial planning.

The four methods of determining stock market fair value below all come from Doug Short’s fantastic blog that is on my daily “must read” list. First, here are two methods employing the use of “price to earnings ratio” …

Crestmont Research P/E Ratio  (from Crestmont Research)

Basic methodology: Investors like profits, and they are willing to pay a certain amount of money for a certain amount of profits. That ratio has a fairly constant long-term average, so we can tell how far above or below that average we are. Thus, we can estimate whether the value of the S&P 500 is currently too high (“expensive”), just right (“fair”) or too low (“cheap”).

What It’s Telling Us Right Now: According to this method, over the course of March 2015, the S&P 500 was 109% higher than it should be (versus 110% higher one month ago) based on historical average price-to-earnings ratios using the “geometric mean.” This is a significant deviation from normal, suggesting that stocks are generally too “expensive” right now.

Cyclical P/E 10 Ratio

Basic methodology: This is similar to the Crestmont method above with a couple of exceptions. The two methods have different ways of calculating the earnings (“E”) component of the P/E Ratio. Also, if you do a best-fit (“regression”) line through the value of P/E 10 ratio over time, it’s sloped upwards, which means that over time, the average P/E 10 ratio has been rising. As of the end of December 2012, I’m going to look at how much higher/lower the P/E 10 ratio is versus the regression line, not just the historical average of P/E 10. It makes the market less “expensive” to do this, but I also feel there may be something to the notion that things have changed over time and want to account for that here.

What It’s Telling Us Right Now: According to this method, over the course of March 2015, the S&P 500 was 42% higher than it should be (versus 43% higher one month ago) based on historical price-to-earnings ratios (actually a best-fit line showing where that average should be today). This is a significant deviation from normal, suggesting that stocks are generally too “expensive” right now. In fact, according to GuruFocus, based on the P/E 10 ratio as of the time of this posting, the S&P will drop at an annual rate of 0.3 percent for the next several years (probably about 10 years, though the site doesn’t specify) – isn’t that crazy? And now, the last two methods for determining stock market fair value: continue reading…

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Note to my readers…

Due to a busy schedule, I won’t be able to post again until Thursday or Friday. Fortunately, it’s a quiet week for the reports I track. We just had a big round of indicators come out that generally showed a more sluggish economy than previous reports had suggested. Let’s hope next week shows an uptick.

Thanks for your continued support…

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