Thursday, December 9, 2010
By: Michael Pento
I’m now actively seeking a cogent answer as to why the Department of Labor always overestimates initial jobless claims. This week they did it by 2k. Applications for jobless benefits decreased by "17k" to 421,000 from a revised 438,000 in the prior week. Of course the headline of a drop of x thousand always sounds better after they’ve raised the prior number up.
However, it may be prudent to point out that on an unadjusted basis the advance number of actual initial claims under state programs totaled 582,007 in the week ending Dec. 4, which was an increase of 169,085 from the previous week.
Now I’m not trying to poo poo the overall numbers here. The four week moving average has come down to 427,500, which was a drop of 4k from the previous week. And the overall direction of initial claims has come down. But the important point to make is that a cessation of layoffs doesn’t necessarily equate to an increase in hiring. Evidence the NFP report last Friday. Corporations have reduced the fat and are running very lean operations. The question that needs to be asked is what is next in line for the economy.
Rising inflation and a mountain of debt issuance has finally started to take a toll on the bond market. The soaring rate of doing business over the past few days will put a damper on business activity across the board. That’s not a recipe for an improved in the employment situation.
Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.