Another week and reading the map for the near-term direction of the economy is still difficult, even with a compass. For example, if you look at employment on the map, it points to an economy moving north. Now, the market as a compass is also pointing north, but the needle seems to have little strength and it is wobbly.
The U.S. labor market is finally improving. Jobs are a lagging indicator. They typically recover many months after the economy comes out of a recession, and this cycle was no exception. So will troubles in Japan, Libya, and elsewhere push up U.S. unemployment later this year?
These troubles are definitely causing magnetic disruption, reducing the magnetic pull of money into the market, which causes the needle to wobble. There are signs, however, that the magnetic disruption is stabilizing, at least in Libya.
The rebels promised the uprising would not further hamper oil production in areas under their control, and the opposition plans to begin exporting more oil “in less than a week,” a rebel representative said. “We are producing about 100,000 to 130,000 barrels a day, and we can easily up that to about 300,000 a day,” rebel representatives stated.
Clearly, though, the magnetic dissonance of the Japanese disaster is a contributor to needle wobbliness and the weak magnetic pull of money into the market.
The auto industry disruptions triggered by Japan’s earthquake and tsunami are about to get worse. In the weeks ahead, supply chain disruptions could make it likely that thousands of American auto-plant workers will be told to stay home, and companies such as Toyota, Honda and others will lose billions of dollars in revenue.
So, will these two major economic and geo-political issues further destabilize the compass needle, which then makes it difficult to ascertain the direction of the economy, or will they stabilize, increasing the clarity of economic direction and reducing magnetic dissonance and increasing magnetic pull of money into the market? The many variables and ubiquitous uncertainty make any definitive answer unrealistic; however, one potential sign of magnetic stability is in the developing iron-like pattern of the employment picture.
Payrolls historically have not turned significantly higher until weekly jobless claims broke below the 400,000 barrier. The four-week moving average, which smooths out weekly volatility, has been below that threshold in four of the past five weeks.
The continuing claims number this week and the March employment report coming out soon will help clarify the metallic pattern, but another factor beginning to tug at the needle is housing, specifically, the largest part of the housing market.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in February, increased 2.1 percent to 90.8. Economists had expected the index, which leads existing home sales by a month or two, to fall 1.0 percent after a previously reported 2.8 percent decline.
Oops … I forgot about those other pesky demonstrators elsewhere in the Middle East. Hmmm …
Trade in the day – Invest in your life …
