Credit: Shutterstock photoThe weekly initial unemployment claims data release this week continued to show elevated levels. Historically, claims exceeding 400,000 per week yields employment gains less than the workforce growth.
Some are using unemployment claims as a litmus test for the economy.
One could argue on the basis of the graph below that there is a general correlation between between initial unemployment claims and GDP - and that if initial unemployment claims remain at current higher levels through the end of this month, GDP growth in 2Q2011 will be lower than the 1.8% in the first quarter. Should this occur there will be serious impacts for U.S. equity investors, especially if China and India keep tightening to try to control inflation in those countries. Further dithering in Europe over how to resolve the debt crisis there will just add some frosting to this very untasty cake.
There is no question the recent economic data is not as good as it was a few months ago.
This week a mostly ignored employment index was issued by The Conference Board showing a decline in employment dynamics.
This was the second month in a row of decline for this Conference Board index. Back-to-back monthly declines in this index are not uncommon.
Econintersect currently does not see any underlying trends in its own employment index which indicate the poor employment data is much more than an economic soft spot. But this soft spot is coming at time when the economy remains on life support, and there are growing headwinds from government budget cutting and lower global economic growth.
Even a small bump could derail this weak economy.
Economic News this Week:
Econintersect’s economic forecast for June 2011 indicates growth in June will be less good.
This week the Weekly Leading Index (WLI) from ECRI declined from 4.9% to 4.1%. This level implies the business conditions six months from now will be approximately the same compared to today. This index is eroding and clearly in a downtrend. If the current trend line holds, this index will be in negative territory in 2 months.
We are continuing to see terrible April and May 2011 data. Econintersect’s previous economic forecasts predicted a growing economy but at cycle peaks. The data being released continues to indicate we are on the downside of cycle peaks – with the cycle peak likely being in March, or possibly April 2011. The data is less good, but not contracting.
No bankruptcies this week.
The table below is available with active links.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
