Unemployment Claims Fall + Prices Rise + Housing "Recovers" = Obama's October Surprise?

Two new Labor Department reports reach a stunning conclusion: Sit on it, Jack Welch! 

From the Unemployment Insurance Weekly Claims Report: 

In the week ending October 6, the advance figure for seasonally adjusted initial claims was 339,000, a decrease of 30,000 from the previous week's revised figure of 369,000. The 4-week moving average was 364,000, a decrease of 11,500 from the previous week's revised average of 375,500.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending September 29, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending September 29 was 3,273,000, a decrease of 15,000 from the preceding week's revised level of 3,288,000. The 4-week moving average was 3,279,250, a decrease of 7,750 from the preceding week's revised average of 3,287,000.

And from the September Import Export Price Indexes: 

U.S. import prices advanced 1.1 percent for the second consecutive month in September, the U.S. Bureau of Labor Statistics reported today, after falling the previous four months. The increase in each of the past two months was led by rising fuel prices. The price index for U.S. exports rose 0.8 percent in September following a 1.0 percent advance in August. 

That's a hefty price increase, and we've all been taught that inflation is the solution to every problem. The drop in new jobless benefits claims adds some support to last week's controversial drop in U-3 unemployment. And with this housing recovery we keep hearing about it, it would seem like the summer of recovery is getting here just in time for the November election. 

Or maybe not. Here are the Wall Street Journal's Sarah Portlock and Tom Barley with a detail from an unnamed Labor Department source: "However, the report may not be as positive as the sharp drop indicates. A Labor Department economist said one large state didn't report additional quarterly figures as expected, accounting for a substantial part of the decrease."

And here's Reason's Anthony Randazzo with a minority opinion on the housing recovery. 

In this era of politicized everything, it would be nice to know what that "large state" is. 

Comments

[Alan Vanneman]

Keep predicting inflation, Tim. Sooner or later, you're bound to be right!

[Tim Cavanaugh]

Keep running your piehole, Alan. You'll always be wrong.

There has been inflation in every quarter but one during the "worst economic downturn since the Great Depression." The only time there was a very mild hiccup of deflation was in 2009, which is also the only time I said there was deflation. You can go back and look at PCE. Or just keep running your piehole.

[sticks]

If i had the energy I'd. Link to Robert d yelling shut ya pie hole.
Love you Tim.

[Warty]

But ALAN VANNEMAN is our most precious resource!

[Paul.]

I think we just reached peak Alan Vanneman.

[The Derider]

There has been inflation in every month, except the hiccup in 2009, since 1955.

The current rate of inflation is well below the historical average, which is all that matters.

[Tulpa Doom]

Are you claiming there is no inflation right now?

[wareagle]

who you gonna believe, Tulpa: the grocery store prices you see every week or some federal agency?

[Tim Cavanaugh]

Even the federal agency says there's inflation. PCE has been positive in every quarter but one since the beginning of the recession. The macrotards' argument is that it hasn't been positive enough, because they read in a magazine that inflation solves all economic problems. Let that brighten your day as you're paying four dollars for a 59-ounce container of orange juice.

[Tim Cavanaugh]

I should have said, "solves every problem if we can just make it higher than it is now," irrespective of how high it is now. It's like stimulus spending that way. Think of the five dollars you pay for 1.5 quarts of ice cream as your contribution to the national recovery.

[LTC(ret) John]

Dammit man, stop reminding me of how I am watching my purchasing power erode every time I fill the gas tank or go to the store!

[Fist of Etiquette]

Saving is for suckers!

[Alan Vanneman]

Keep running your piehole, Tim. You sound just like Joe Biden!

[Paul.]

I know you are, but what am I? Is this what your argument comes down to?

[wareagle]

does anyone ever do a story on how the citrus producers are affected by the likely drop in sales due to higher prices or the folks in the peanut butter bidness? I wonder what the fallout is on the makers of products when consumers are forced to change behavior due to higher costs.

[Appalachian Australian]

There are stores in the Wall Street Journal about this from time to time. Usually what happens is the producer refocuses from selling a commodity that appeals to wide swathe of demographics to focusing in selling expensive specialty goods to the upper classes.

In other words, inflation means the poor get punched in the nose again, and eat more crappy bulk food and fewer stuff that actually tastes good/is healthy.

[VG Zaytsev]

Let that brighten your day as you're paying four dollars for a 59-ounce container of orange juice.

Dude, start shopping at Costco - it's like 5 bucks for a gallon of fresh squeezed oj.

[Spoonman.]

And their frozen concentrate is very good and much cheaper.

I only wish Costco were closer. Their bamboo floor is the shit, too, way better than Lumber Liquidators'.

[The Derider]

Jesus Christ, macrotards?

Hire somebody that has some basic economic knowledge to write these posts for you, you're embarrassing yourself.

[Jordan]

This is just pathetic, even for you, Vanneman.

[Palin's Buttplug]

Vanneman is right. A two-month fluctuation in fuel prices is not "inflation". It is called supply/demand variance. The five year trend on energy prices is down. The three year is up. Big deal.

[R C Dean]

A two-month fluctuation in fuel prices is not "inflation"

Gas price chart here:

http://ycharts.com/indicators/.....endDate;=

Go to the ten year chart. Looks like price inflation to me, with the outlier being the contraction when the economy tanked in '08 when the bubble popped.

[OldMexican]

Re: Palin's Buttwipe,

Vanneman is right. A two-month fluctuation in fuel prices is not "inflation".

No, of course not. The constant increase in the money supply is inflation.

Leave the complicated things to us men, honey. Go back to your embroidery.

[heller]

Wow shrike, time to go back school. You won't find a trend by comparing two data points.

[OldMexican]

Re: Anal Vanneman,

Keep predicting inflation, Tim. Sooner or later, you're bound to be right!

Who's "predicting", you bloviating fool?

[The Hammer]

Notice that Anal sprinted away with his tail between his legs the second Tim showed up in the thread with actual evidence to contradict his idiotic, predictable talking points.

[Red Rocks Rockin]

Has Vanneman ever defended a comment of his? The only MO I've observed is him dropping a steaming turd for the rest of the commentariat to bury.

[Tulpa Doom]

A Labor Department economist said one large state didn't report additional quarterly figures as expected, accounting for a substantial part of the decrease.

Bets on Governor Moonbeam taking one for the TEAM?

[VG Zaytsev]

Yep.

I'm in So Cal and the business climate took a definite turn for the worse in September.

[Appalachian Australian]

We officially moved everything that was still in southern California out (to Ohio) on September 15.

There's just no point in even trying out there anymore.

[BarryD]

I'm sure the recent gas prices will give business a boost, though.

[The Hammer]

MOAR SOLAR!!!!

[Drake]

This is sliding under the mainstream radar so far. There is going to be a hell of an adjustment next month unless there is a lot more messaging.

[Mumu Bobby]

Come on. A dog ate those 25,000 unemployment applications. They'll get processed next week when they come out the other end.

[wareagle]

sorry but anyone buying into the three-tenths of a point drop in the jobless rate is either not thinking or enthused about 580K new part-time positions. The former simply reflects why Dems remain viable; the latter says the bar has not just been lowered, it has been dropped.

[Loki]

...the bar has not just been lowered, it has been dropped.

Quick, someone get James Cameron on the phone! We need him to raise the bar again.

[John Thacker]

That's a hefty price increase, and we've all been taught that inflation is the solution to every problem.

A stable and predictable growth rate in MV (money supply times velocity, basically money used in the economy) is a good thing. MV gets reflected in two components-- real increases in the economy (good) and inflation (bad). When the real economy slows, which is bad, you have the choice of two basic things: letting inflation increase, letting the flow of money circulating through the economy collapse, and any combination of the two.

It's a choice of which outcome you'd like in a bad situation. If you let the flow of money circulating collapse, then you end up relatively helping those with strict long term contracts and long term creditors, which includes many retirees, but also banks and union employees. For the latter reason, you also trigger more confrontation over union contracts whether in government or in professional sports. People that aren't on such wage contracts see no wage increases while the union employees are hurt, and debtors feel relatively more of the pinch.

If you let inflation increase, then essentially the reverse happens as far as who bears the burden.

[John Thacker]

There's then a separate argument of whether one outcome is an improvement for the country overall. Part of it depends on how contracts are set for the future, and whether expectations they depend on-- whether it's better to let inflation exceed previous expectations (it's below now) or better to let the money circulating drop below expectations. There's also a separate argument that wages are sticky at a zero bound, so if wages need to adjust between and within sectors, inflation makes it easier to do so. (People really hate nominal wage cuts; they'd often be more upset with a 1% pay cut in a time of 0% inflation than with a 3% pay raise in a time of 4.5% inflation.)

[Appalachian Australian]

The latest Econtalk talked about how the stickiness of wages is a modern phenomonen, and that if wage cuts due to deflation were normal, it wouldn't bother people to get a 20% wage cut when prices have also dropped 20% and all their friends are also getting 20% wage cuts.

Wage cuts were normal in the days of a gold standard.

[John Thacker]

An example of how MV (or NGDP) can increase without inflation increasing-- if a bunch of new things are invented (or quality improves, but people don't trust that argument as much) then the total value of money spent in the economy can increase without prices for any of the existing things increasing.

[Bill]

A stable money supply leads to economic stability and increases peoples confidence to make longer term investments and decisions (like home buying).

This would be true whether it was 1.5 % inflation per year, or 0%, or even 1.5% deflation per year. Stability and predictability are the keys.

If you had gentle deflation, prices would fall, your money would buy more and instead of getting rid of the penny (or the mill?) you could actually use those to buy things. Then the influence of technology and labor productivity would be seen in most products, not just electronics.

[R C Dean]

FWIW its worth, I don't think inflation at any level is consistent with a stable money supply.

If you own waterfront property, and the water level is only increasing at 2 inches a year, do you think of the water level as stable? Are you pleased that the surface area of your property is shrinking at a constant rate? Does the fact that only another 2 inches per year of your house is flooded cause you joy?

[Whiterun Guard]

Yeah, but there's a finite amount of land, while nothing says there's a finite amount of money.

[R C Dean]

I'm making a point about abusing the word stable to describe a steady increase.

Also, from the individual's perspective, there is indeed a finite amount of value that they can accumulate. Inflation constantly erodes that finite amount.

The problem with designed inflation is that it intentionally increases the money supply at a rate exceeding economic growth.

And, of course, nobody in history has ever managed to have "steady, predictable" inflation over a long time frame.

So, designed inflation is a guarantee that someday you will get unsteady, unpredictable inflation.

Inflation punishes savers. Period, full stop. Staying ahead of inflation means you are betting on a steadily increasing rate of return and money supply, an asymptotal curve that will someday, inevitably, go vertical. Keynes response to this was that he planned to be dead when that happened. Personally, I don't think intentionally creating an unstable currency that is bound to spike and collapse is the way to go.

The problem with stable deflation is that stuffing money under your mattress becomes a viable investment strategy.

Who said anything about stable deflation? I'm talking about a stable money supply, one that grows at the same rate as the economy.

[Mo]

That's a terrible analogy. Steady, predictable inflation can be priced in everything from long term contracts to interest rates.

[Appalachian Australian]

Can you please point to any time when inflation has been either steady or predictable?

The Easter Bunny is a steady of chocolate eggs, and Santa Claus is a predictable way for Christmas wishes to come true. But like most aspects of Keyensian economics, they are fairy tales perpetrated by conniving grown-ups on children, whether chronologically or emotionally so.

[Mo]

For the last 2 decades, inflation has been between 1.5-3.5% every year except for the 2008 and 2009. That's pretty damn steady and predictable.

[OldMexican]

Re: Mo,

For the last 2 decades, inflation has been between 1.5-3.5% every year except for the 2008 and 2009.

3.5% is more than TWO TIMES 1.5%. I don't know what is your definition of "steady", but I can tell you - it sucks.

By the way, you're full of shit. TRUE inflation has been neither stable nor that sanguine.

[Mo]

Those shadow stats numbers are full of shit. Based on those numbers, the average person's income today is equivalent to less than half that of the equivalent person's similar income in 2003. It doesn't even pass the sniff test that 100K is equivalent to 50K in 2003.

[Mo]

The difference between 1.5% inflation and 3.5% inflation is a lot less than the difference between 10% inflation and 15% inflation, even though 15% is "only" 50% larger than 10%.

Are you saying the difference between 0.1% inflation and 0.5% inflation is massive because ZOMG! 0.5% is 5 times the size of 0.1%?

[Mo]

The problem with stable deflation is that stuffing money under your mattress becomes a viable investment strategy. That raises the hurdle rate for investments and favors pulling money out of circulation.

[Appalachian Australian]

What's wrong with people saving money under a mattress?

Why is saving hated so much?

[Mo]

I did not mean money under a mattress in a metophorical sense, I meant it in a literal sense.

Saving is fine. If by saving you mean putting it in a bank or an investment account. The benefit of that is that money can move around the system and new businesses can be lent the money to grow the economy. Money under a mattress just sits under a mattress and does nothing.

[OldMexican]

Re: Mo,

Money under a mattress just sits under a mattress and does nothing.

Oh, those evil, eeeeevil mattress stuffers! There ought to be a Federal Reserve!

Oh, wait...

[Invisible Finger]

God you're a fucking idiot.

Money is ALWAYS saved FOR something, no matter WHERE it resides. If a bank wants to BORROW my savings for whatever investment they want to make, they either have to pay me an agreeable interest rate for it or they don't get the loan.

[OldMexican]

Re: Mo,

The problem with stable deflation is that stuffing money under your mattress becomes a viable investment strategy.

Ha ha ha! That's funny. The saver's paradox. Oh, that's funny.

Oh. My. God. You're serious.

HA HA HA HA HA HA HA HA!!!!

That raises the hurdle rate for investments and favors pulling money out of circulation.

Yeah, and deflation entices people not to buy bread and eat until the price comes low enough.

Why, oh why do stupid Keynesians (there aren't any other kind, it seems) keep ignoring the Law Of Time Preference? Do they really think these are made-up laws?

[R C Dean]

When the real economy slows, which is bad, you have the choice of two basic things: letting inflation increase, letting the flow of money circulating through the economy collapse, and any combination of the two.

I'm not clear on why failing to increase the money supply at a rate exceeding economic growth will lead to a collapse of money flows.

The scholarship on the US economy pre-Fed shows that recessions occurred just about as often as they do now, and recoveries were a tad quicker, after all.

Aside from that, of course, inflation punishes capital formation, and deflation rewards it, as inflation erodes the value of capital and deflation increases it. Which dynamic do you suppose leads to more capital formation, and do you which (more or less capital formation) is better for the economy in the long run?

[Appalachian Australian]

Aside from that, of course, inflation punishes capital formation, and deflation rewards it, as inflation erodes the value of capital and deflation increases it. Which dynamic do you suppose leads to more capital formation, and do you which (more or less capital formation) is better for the economy in the long run?

Good discussion of that on this week's EconTalk: econtalk.org/archives/2012/10/garett_jones_on_2 (dot) html (thanks Reason for making it difficult to post URLs over 50 characters long)

[sticks]

Has the "writer" even read a report. If "he" has he would know just what is going down. It is not the dollar but our nationalism that is suffering. We need ore.

[Red Rocks Rockin]

We need ore.

I prefer gold and platinum ore but silver will do in a pinch.

[The Hammer]

This is the stupidest in a very long line of stupid posts. Why the hell did you put "Writer" in quotes? Or "He?" Are you implying that Cavanaugh didn't write this post? Who do you think did? Are you trying to call him a girl? Is that your idea of a clever insult? What the fuck does "Our nationalism that is suffering" even mean?

[Appalachian Australian]

Inflation that leads to higher fuel prices and food will definitely make Americans feel better about how positive the economy is!

Wage inflation tends to lag a few months behind everything else. Nobody's going to feel good when they get their same $8.25/hr paycheck and fuel costs $6/gallon in southern California.

[T o n y]

According to the men's underwear indicator, things look to be improving.

[Appalachian Australian]

I recently made the switch from cotton boxers to Adidas trunks/briefs, so I played a small part in these anecdotal statistics.

They were all made overseas and imported, so I fail to see how my mass underpants purchase will improve the state of U.S. employment. My wife did recently get a seasonal job stocking shelves at a retailer, so maybe we'll see more of those kind of jobs... until Thanksgiving (and the election) is over.

Also, I'm worried Tony's going to get far too much enjoyment out of knowing about my underwear purchasing behaviours. I am, however, willing to take one for the team if it means we don't have to hear Tony blather his pseudo-Keyenesian opinions (he seems to have forgot about the whole "lower government spending during boom years" part of General Theory) around here for a few hours.

[wareagle]

if you dig into the numbers behind the jobless report, 580K new part-time gigs are in the mix. So yes, there will be more of what your wife has and people will pretend to not notice the seasonal aspect to this hiring.

[Restoras]

While I too recently made a mass shift from boxers to boxer briefs, I am not sure that is any indication of a general rebound. I have not yet replaced my undershirts and will continue to hold out. My socks are threadbare and desperately need to be replaced but I will hold out until after Christmas.

[cryptarchy]

Socks are far more important and boxers or boxerbriefs. I suggest going commando, and if you wish to solve the sock issue, start wearing vibram five fingers.

[Appalachian Australian]

I recently stopped going commando, which, according to Huffington Post, means my confidence in the economy is soaring.

Also I hear that political polls are no longer to be trusted. This has nothing to do with Romney showing a lead over Obama.

Also I believe a large rodent's awareness of its own shadow will help predict next year's weather.

[Appalachian Australian]

I did manage to buy a package of undershirts, as Kohl's had a "buy two, get the second half off" deal that applied to men's undershirts, men's underpants, and men's socks. Unfortunately, I completely cleaned Kohl's out of trunks in non-stupid colours in non-fat sizes, and they have yet to restock (it's been several weeks). Therefore, this underpants recovery may be short-lived, at least until another truck comes to Kohl's--and who can say if there will be another mega-sale?

My wife is currently scheduled to work 4 hours in total next week. According to Obama's method of counting jobless statistics, she counts as "part time employed", and he will no doubt tout unloading trucks for Black Friday as a sign of our economy's impending recovery.

I myself plan to do a little work on the side this weekend in addition to my full-time gig, so I probably count as having 2 jobs.

[Red Rocks Rockin]

Also known as the "Al Bundy Metric."

[OldMexican]

Re: Tony,

Uh uh. I prefer the Railcar loads of Waste indicator as it correlates with true GDP to 82%. And the waste transportation is on the downwards slope.

http://www.marketplace.org/top.....ough-trash

Chart

[Appalachian Australian]

Well in theory you'll find restoras's old undergarments in one of those railcars.

[Auric Demonocles]

Unemployment Claims Fall + Prices Rise + Housing "Recovers"

I blame Bush.

[The Late P Brooks]

The latest Econtalk talked about how the stickiness of wages is a modern phenomonen

I suspect the modern evolution of wages which are not directly tied to productivity and profits would explain much of this.

[The Late P Brooks]

As I recall, the justification for a steadily expanding money supply is to keep pace with productivity increases, not to trick people into thinking they are getting "richer".

[Ken Shultz]

I question how well a sunny outlook on the economy rallies Obama voters.

It would seem to render their message convoluted at best.

How do you scream about how the economy's so bad we gotta soak the rich out of one side of your mouth, and protest that the economy isn't really so bad out of the other...

You're gonna run into trouble shifting gears back and forth like that.

[T o n y]

Taxing the rich is only and has always only been about the deficit--Republicans claimed #1 domestic concern.

[darius404]

Bullshit. Taxing the rich more will do jack all to fix the debt. People interested in more taxes always fall back on "they need to pay their fair share" when the debt argument fails. It's about envy.

[Mumu Bobby]

Taxing the rich solves the deficit in the same way canning Valentine makes the Red Sox WS champs next year.

[Invisible Finger]

Tony's idea is to tax the rich and then print money and give it to them so they'll stimulate the economy.

[GILMORE]

T o n y| 10.11.12 @ 12:32PM |#

Taxing the rich is only and has always only been about the deficit--Republicans claimed #1 domestic concern.

Derp. Tony, please to explain how taxing "the 1%" at exhorbitant rates does anything to the 15trillion$ deficit?

Many have pointed out - it wouldn't so much as generate 1% additional income, relative to other aspects of the tax system.

So how is it 'about the deficit', and NOT just symbolic progressive/socialist class-warfare?

[GILMORE]

However, the report may not be as positive as the sharp drop indicates. A Labor Department economist said one large state didn't report additional quarterly figures as expected, accounting for a substantial part of the decrease."

A story @ Marketwatch had quotes from economists noting the only state big enough to "lose" (aka fail to report) 30,000 expected unemploymment applications would be California.

They also note that the months with the most common changes in #of applications tend to be 'beginning of quarter' -

Added Stephen Stanley of Pierpont Securities: "The formula for the size of a claimant's benefit check is derived based on an average of their last few quarters of pay (the more you were earning before being laid off, the bigger your unemployment check would be). Thus, in many cases, it pays for a laid-off worker to game the formula by waiting until the beginning of the next calendar quarter to file... as they may have been getting paid more in the quarter when they were laid off than in the quarter that rolls out of the equation if they wait."

http://www.marketwatch.com/sto.....=countdown

the idea here being... the employment number can be read as bullshit on at least 2 levels.