Wall Street Greek: Taking the Pulse of the Economy

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets. Two key data points excited the market last week, leading a rally that we believe was unwarranted.

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Taking Economy's Pulse

Market enthusiasts and Nobel laureates took apprise of the economy last week. Wall Street's pulse seemed healthier after the release of key data on the state of the labor market and retail sector. While we hate playing the role of spoiler, we enjoy helping you see through the mirage created by the flurried popular press... so don't call your broker just yet!

Last week's check of new unemployment insurance filers counted 521,000 newly jobless. That compared favorably against the previous week's revised figure of 554,000. Furthermore, the periodic tally reached its lowest flow rate since January. The count also proved better than the economists' consensus forecast for 540K, based on Bloomberg's survey.

Just a week prior, we saw the federal government's monthly count of unemployment climb a tenth of a percentage point higher to 9.8% for September. However, last week's Department of Labor data showed the advance seasonally adjusted insured unemployment rate improved a tenth of a percent to 4.5% for the period ended September 26. But be careful, because this by no means suggests unemployment has peaked. Unemployment benefits last through a specified period before expiring, leaving the folks who lost their job at the start of the recession high and dry without benefits now... and not accounted for by this report either. Still, the data certainly offers reason for hope, especially when considering that the "high and dry" numbers are being controlled via legislated extensions of unemployment benefits.

Also encouraging, employment services firm, Robert Half International, recently surveyed employers and found that hiring new employees is their top priority once the economy bounces back. According to RHI, some 31% of those asked where they would invest new capital, responded they would look to hiring new staff.

The International Council of Shopping Centers - Goldman Sachs produced its preliminary report for September's Chain Store Sales last Thursday. According to the ICSC, those sales inched higher by 0.1% in September, offering what its Chief Economist Michael P. Niemera called, "the beginning of recovery."

However, your favorite truth-teller, Wall Street Greek, feels compelled to warn you of shenanigans run amok. The first sales gain since July 2008 got a special boost you see. Labor Day arrived especially late this year, in fact, as late as it could possibly be. School does not start until summer officially finishes though. Thus, "back to school" shopping season extended deep into this past September. Thus, when taking the late Labor Day impact into account, a 0.1% gain does not even offer an ounce of enthusiasm.

However, part of the reason the market grew enthusiastic Thursday was because of a second report. Retail Metrics, Inc. reported that September same-store sales increased 1.1% last month, significantly more than the ICSC noted for September chain store sales. Retail Metrics also noted that 70% of retailers reported better numbers than the average estimate the statistician had compiled from analysts.

Even so, Labor Day falling on September 7, versus September 1 last year, is BIG. It plays a significant role when we are speaking about "back to school" shopping season. It's also very likely that a lack of August sales resulting from the longer summer season, led panicky retailers to slash prices and promote products to lure in last minute September sales, thus boosting them. So from my perspective, because of the special Labor Day factor and the unaccounted for uninsured unemployed, we cannot call the "beginning of recovery" in retail or labor just yet.