Saturday, November 23, 2024
A good day for stocks was supposedly sparked by economic reports released Thursday morning that supposedly were good news and that supposedly showed that the US economy is not slipping into recession.
What?
One week ago, the Labor Department released its monthly jobs report and, for the most part, the numbers came in below expectations. Average Hourly Earnings missed its mark. Nonfarm payrolls number missed its mark, and the unemployment rate ticked up to 4.3 from an expected 4.1%.
And the increase in the unemployment rate activated the Sahm Rule, into which we put no faith whatsoever. Regardless, the commentary from precisely one-half of the political class and the talking heads on cable news was that the economy was in a recession and stocks got crushed.
Between the close on Thursday and the close on Monday, the S&P 500 lost over 5% of its value and the financial press was filled with stories on how to recession-proof your portfolio and your life.
We said at the time that we didn’t think the US economy was in recession and was unlikely to go into a recession this year. Again, we dismissed the Sahm Rule as did its originator, Claudia Sahm, and we speculated that markets would need to consolidate for a while before they could head higher.
Then, as we do every Thursday, we got the Initial and Continuing Jobless Claims numbers and apparently, they proved it was, well, Happy Days Are Here Again.
They did nothing of the sort. We’ll get into the specifics in just a minute, but the data were mixed, at best. And claims for unemployment benefits have been bouncing around, mostly higher for over a year now.
Let’s be clear. When it comes to unemployment, lower is better than higher but the labor market is still recovering from the pandemic dislocations and unemployment claims are likely to trend higher still. But one number coming in slightly better than expectations in a sea of otherwise worrisome numbers proves nothing. Nothing good. Nothing bad. Nothing indifferent. Nothing. No matter what the headlines might say.
Please don’t listen to these people! Especially in an election year.
Rant over!
A really good day for stocks as all the indexes were up, up sharply, on good volume and with good breadth.
Interest rates were up across the board.
Sixteen companies reported earnings on Thursday. All but three met or exceeded expectations for both the bottom and top lines. Good news on the earnings front.
So, the jobless claims. Every Thursday, the Labor Department releases the previous week’s Initial Claims for Unemployment Insurance and Continuing Claims for Unemployment Insurance. In other words, we get the number of newly unemployed people and the number of people who are unemployed and who haven’t gotten a new job yet.
Every Thursday.
This number has been creeping up in recent months, really for most of the year. And recently it has missed expectations. Expectations that have been trending higher. Again, any unemployment is bad news, but these increases have been off a very low, post pandemic, base. The labor market is fine, but it has undoubtedly been weakening.
So, with that context set.
Initial claims for unemployment benefits were expected to come in at 241,000. And they came in better than that number at 233,000. Good news, indeed.
But the continuing claims number was a different story. Expectations were for 1,870,000 continuing claims but the print was for 1,875,000, not so good. And this is against last week’s number of 1,869,000.
These numbers are fine. In a normal week they might go without notice. But do they mean a recession is off the table? No! That’s crazy!
Are we going into a recession. Nobody knows. No matter what they say.
