{"id":1815,"date":"2020-08-20T13:46:36","date_gmt":"2020-08-20T17:46:36","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1815"},"modified":"2020-08-20T13:46:36","modified_gmt":"2020-08-20T17:46:36","slug":"weekly-jobless-claims-august-philadelphia-fed-manufacturing-index-and-july-leading-indicators","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1815","title":{"rendered":"Weekly Jobless Claims, August Philadelphia Fed Manufacturing Index and July Leading Indicators"},"content":{"rendered":"\n

KEY DATA:<\/u><\/strong> Claims: +135,000\/ Phila. Fed (Manufacturing): -6.9 points; Orders: -4 points; Employees: -11.1 points\/ LEI: +1.4%<\/p>\n\n\n\n

IN A NUTSHELL:<\/u><\/strong> \u201cThe recovery is moving forward, but signs that the pace is moderating are spreading.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT MEANS:<\/u><\/strong>  The economy this year has been like the weather in so many areas: If you don\u2019t like it, wait a minute and it will change\u201d.  Are we starting to see another change in the direction of growth?  We just may be.  Consider first the labor markets.  For the first time in five months, the weekly jobless claims number rose. Now let\u2019s not get too crazy about this increase.  In normal times, with normal levels of claims, the numbers bounce around all the time.<\/em><\/strong>  And anyone who thinks you can seasonally adjust a data set on a weekly basis without getting some volatility, has not tried to seasonally adjust any number. It really cannot be done.  Still, with the government\u2019s business and household income subsidies running out, it isn\u2019t clear whether those firms that are just hanging on can make it.<\/em><\/strong>  It has been expected (at least by me) that by the end of the summer, many firms could throw in the towel, meaning claims rise for while going forward.  It is way too early to say that, but the claims increase is at least a yellow flag.<\/em><\/strong><\/p>\n\n\n\n

On the manufacturing front, conditions are still good but they may be moderating.  The Philadelphia Fed\u2019s August manufacturing index declined somewhat more than forecast.<\/em><\/strong>  Order growth eased, as did hiring, while backlogs have started to decline.<\/em><\/strong>  That said, the sector is still expanding at a decent pace and firms continue to hire more workers. <\/em><\/strong> In addition, firms are able to push through more price increases, though their costs are going up as well.<\/p>\n\n\n\n

Looking toward the future, the outlook is good, as long as you put things in perspective.<\/em><\/strong>  The Conference Board\u2019s Leading Economic Index increased at a less robust pace in July than it did in May and June.  Notice I said \u201cless robust pace\u201d.  In normal times a 1.4% rise would be viewed as pointing to stronger growth ahead.<\/em><\/strong>  But looking out to the fall and winter, it implies that growth will come down from its elevated third quarter pace.  That should surprise no one as the consensus for third quarter GDP is up about twenty percent.  That rate of growth is obviously not sustainable.  Thus, when the report notes that \u201cThe LEI suggests that the pace of economic growth will weaken substantially during the final months of 2020\u201d, <\/em>it is not necessarily saying we are headed into a recession \u2013 only a slower growth phase.<\/p>\n\n\n\n

IMPLICATIONS:<\/u><\/strong> I don\u2019t want to make too much of a deal out of the rise in unemployment claims last week. <\/em><\/strong>I would normally just chalk it up to the normal ebb and flow of the data and that is likely what happened. But there appear to be many in Washington who seem to think the economy can stand on its own and doesn\u2019t need any additional stimulus <\/em><\/strong>or if it does, it should only get enough to get through the November election.  I don\u2019t believe I am alone when I say that is really questionable thinking.  Most economists believe as I do that more help is needed.<\/em><\/strong>  Without it, consumer spending<\/em><\/strong>, which is likely to set a record for growth this period, could wind up being quite modest in the fourth quarter.<\/em><\/strong>  Firms that have used the government largesse to help pay workers will discover they actually have to make money on their own to cover payroll costs and with consumption lagging, those funds just might not be there.  So, while the economy may look red hot right now, the fire could dim pretty quickly.<\/em><\/strong> Of course, if we get a sharp drop in claims next week, all this turns into a \u201cnever mind\u201d, which is what I suspect most investors are thinking.       <\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Claims: +135,000\/ Phila. Fed (Manufacturing): -6.9 points; Orders: -4 points; Employees: -11.1 points\/ LEI: +1.4% IN A NUTSHELL: \u201cThe recovery is moving forward, but signs that the pace is moderating are spreading.\u201d WHAT IT MEANS:  The economy this year has been like the weather in so many areas: If you don\u2019t like it, wait a minute … Continue reading Weekly Jobless Claims, August Philadelphia Fed Manufacturing Index and July Leading Indicators<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1815","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1815","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1815"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1815\/revisions"}],"predecessor-version":[{"id":1816,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1815\/revisions\/1816"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1815"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1815"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1815"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}