Thursday, August 20, 2009

Economic Indicators

Today's headlines declare that US initial jobless claims rose unexpectedly. This, of course, is a negative sign. I'm just not sure why it's so "unexpectedly." There is a strange tendency of the media and investors to expect things to move in some smooth, linear path. If we're supposed to be in a recovery, surely all economic data will point to progressively more positive signs, right?
Not sure where that assumption comes from, but economic indicators never all point one way or the other. Maybe new claims for unemployment drop, while the number of people on unemployment rises a little bit--happens all the time. As I see in one of the news items today: The Labor Department said the number of people collecting long-term unemployment benefits edged up 2,000 to 6.24 million in the week ended August 8. However, the four-week moving average declined 2,500 to 6.27 million.
That's how tricky economic data can be--even though the number of people on unemployment ticked upward, the 4-week moving average declined. Moving averages, remember, help to show a trend as opposed to over-representing what happened just yesterday or just last week.
So, if you're wondering why it sometimes seems that nobody really knows where the economy is right now or where it's headed, there is a very good reason for that--nobody does.

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