Bizarre Week: Wall Street Takes a Dive

Strange week on Wall Street.

Weekly unadjusted initial unemployment claims popped above the 2010 year-ago number.

Yet the BLS jobs report this week (analysis here) was outstanding.

Was it caused by an unusual event in unemployment?  Maybe, but the same uptick happened in 2008 – and the convergence began in the prior week.  But hey – this is an economic recovery expansion right?  As the BLS jobs data for April actually uses a mid month cutoff – whatever caused the spike in initial unemployment claims will not be in the current jobs data release.  And the great BLS numbers released this week are subject to revision for several months.

But these were not the only bizarre data points this week.

  • April ISM non-manufacturing was positive but far less good than a month ago.
  • Productivity growth in 1Q2011 came in at a paltry 1.9% annual growth rate.
  • The global investing world was a sea of red this week lead by the collapse of commodities.

This week Econintersect released its economic forecast for May 2011 anticipating a continuing flat growth rate.  The question –  Is the economy on the doorstep of another dip?

The fundamental economic real time building blocks are positive, and in some ways are gaining strength.  The economy is not correcting when the transport of goods and materials to your local shopping center remains up YoY.  Some transport data points are only a week old.  Yes, some data points are not showing the same growth rate as they were earlier this year, but others are stronger.  Overall a push.

The unsettling aspect of this week is the investing markets.  There is a correlation between wealth and spending, and many are poorer as this week draws to a close.  The economy has been “moderately” growing (Fed Chairman Bernanke’s words) – nothing has changed.   It is the markets themselves which were growing at rates above the economic dynamics.

Sooner or later, the markets (stocks and commodities) correct to reflect a more considered forward view.  The high end consumer is caught in this game of investing musical chairs, and as they are a major element in consumer “growth” – there might be another headwind to growth in the months to come.

But with any luck, the energy headwind might be abating.  Econintersect remains positive for near term economic growth.

Economic News this Week:

Econintersect issued this week its economic forecast for May 2011 indicating a peaking of this current economic sub-cycle.  In simple words, the same moderate recovery seen in March and April will continue in May.

This week the Weekly Leading Index (WLI) from ECRI declined from 7.5%  to 6.7%.  This level implies the business conditions six months from now will be approximately the same or slightly improved compared to today.

As discussed above, initial unemployment claims rose rather strongly in this week’s release.  I suspect there might be an issue with the seasonal adjustment factors but only time will tell.

Most of the data this week had elements of uncertainty – but overall did not rise to a level which signaled a correction to moderate economic growth forecast.

Weekly Economic Release Scorecard:

Item Headline Analysis
April Jobs Report
Jobs up a solid 244,000.  Economic markers in the data are not excellent.
March Consumer Credit
With smoke and mirrors consumer credit is up 0.06% YoY
Market Valuations

Doug Short and John Lounsbury review three market valuation indicators
Commodity Prices

Dirk Ehnts suggests Goldman Sachs may have been involved in the commodity price bubbles
Initial Unemployment Claims
The seasonally and non-seasonally adjusted data tell the same bad story
1Q2011 Productivity
Unusually small productivity growth
April ISM Non-Manufacturing
Less Good
This survey is not as bad as the pundits are making out
April ADP Employment
Lower growth, and barely above labor force growth rates
Bush Tax Cuts

Elliott Morss overviews effects of eliminating some of the Bush Tax Cuts on deficit reduction
March Manufacturing
Manufacturing new orders are in record territory
Student Loans

Malcolm Harris overviews the growing debt problem against the benefits of college education
April ISM Manufacturing
Less Good
The underlying survey results show manufacturing is growing
March Construction Spending
Not Up – still falling YoY but at a slower rate
Global Empires

Elliott Morss looks at the role of education in maintaining empires
May 2011 Economic Forecast

Same economy as April

Sunil Chandra argues that the Reserve Bank should not be raising the prime rate
Real Estate Short Sales

Frank McKenna discusses short sale flipping fraud
Dollar as Reserve Currency

Michael Pettis looks at how the reserve currency has created global imbalances
BRICS and the dollar

Sanjeev Kulkarni opines on the BRIC conference outcome
MERS and Foreclosuregate

Michael Collins lists essential elements in the government settlements with the banking industry
Global Stock Markets

Erik McCurdy graphs the warning signals

Bankruptcy this Week:  Raser Technologies, Majestic Capital (fdba CRM Holdings) and Majestic USA Capital, Caribe Media and CII Acquisition Holdings

Failed Banks this Week:

Related Articles

BLS:  Jobs Up Strongly in April 2011 by Steven Hansen

ADP Publishes Painfully Low Employment Growth in April 2011 by Steven Hansen

Initial Unemployment Claims Rise – A Harbinger of Poor April Jobs Outlook by Steven Hansen

College Training for Unemployment by Mike Konczal

Unemployment and the Market:  A 62-Year Perspective by Doug Short (