Wednesday, January 20, 2010
How are the data presented? At an annual, quarterly, monthly, or weekly frequency? At the onset of the New Year, you will undoubtedly see many charts illustrating records broken in 2009 using annual measures. This is always fun (from a data junkie's point of view), but it only tells the reader where we were, on average in many cases, rather than where we are now! Quarterly data are the same story - often presented well after the culmination of the period.
Alternatively, monthly data are a little more telling but still lagged by at least one month. For example, the employment report is the first major economic release of the month, which sets the stage for many subsequent releases. However, by the release date, generally the first Friday of the month, the survey information is already one month old.
This leaves weekly, or even daily, data. High-frequency data can tell us "where we are now", but are subject to substantial volatility. Nevertheless, high-frequency data are quite informative at economic turning points. So where are we?
Here are three high-frequency indicators that show an improving labor market, as illustrated by initial claims and daily tax receipts. However, the money multipliers remain at historically low levels, signaling that consumer spending and credit growth continues to elude monetary policymakers.
The weekly initial claimant count is dropping off quickly. So far, the 4-week moving average is 33% off its peak, a definite positive. And comparing to previous recoveries, the claimant count does suggest that this recovery will look more like a job-plus, rather than a job-less recovery.
However, don't get too excited - an awful lot of jobs need to be created each month just to drop the unemployment rate.
The stabilization of the labor market is likewise seen in the Treasury's daily tax receipts. Daily receipts have stabilized, and are now growing, off of their lows.
High-frequency monetary aggregate indicators show that traditional Fed policy - increasing bank reserves through open market operations - is not flowing into the economy as new money for spending on goods and services. Money multipliers of all types are half of what they were just two years ago (dropping even lower in recent months).
This is the bane of the Fed's policy existence during and in the aftermath of the banking crisis. Inflation is not going to be a problem until this money clog frees up.
There is widespread stabilization, and even improvements, as shown by the high-frequency economic data. Perhaps I will follow up this post on the remaining weekly data, like on credit extension and housing.