Thursday, April 09, 2009

What's going on in the economy?

It's important to ignore the market on some days and focus on the mundane data.

"The number of Americans filing first-time claims for unemployment insurance exceeded 600,000 for a 10th straight week and the total collecting benefits increased to a record, signs the labor market remains weak.

First-time jobless claims fell by 20,000 to 654,000 in the week ended April 4, from a revised 674,000 a week earlier that was the highest since 1982, the Labor Department said today in Washington. The number of people staying on benefit rolls rose to a record 5.84 million in the prior week."

I think the best analogy I've heard is that the economy jumped out of an airplane last fall and it was in free fall for the last six months. At some point in the last six weeks we've probably pulled the parachute. Does that mean we've recovered? Of course not, it just means we're falling at a slower rate. Continuing claims for unemployment are at 5.8 million! 10 straight weeks of 600k + people filing for unemployment. These are staggering data points.

Also, the Federal Reserve's Open Market Committee Minutes were released yesterday and there were some eye opening comments in there....

"The weaker trajectory of real output resulted in the projected path of the unemployment rate rising more steeply into early next year before flattening out at a high level over the rest of the year."

So the Fed Reserve now predicts higher sustained unemployment through the end of 2010. That's real news.

"The information reviewed at the March 17-18 meeting indicated that economic activity had fallen sharply in recent months. The contraction was reflected in widespread declines in payroll employment and industrial production. Consumer spending appeared to remain at a low level after changing little, on balance, in recent months. The housing market weakened further, and nonresidential construction fell. Business spending on equipment and software continued to fall across a broad range of categories. Despite the cutbacks in production, inventory overhangs appeared to worsen in a number of areas. Both headline and core consumer prices edged up in January and February…. Labor market conditions continued to deteriorate. Private payroll employment dropped considerably over the three months ending in February."

You can read the entire report here if your prescription for sleeping pills ran out...

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