Economic Review 2009-05-21

The first thing I learned in my economics class was the difference between a news and a report. A report is something that comes out as expected. E.g. I did okay in some of the accounting classes, that is a news. Because everybody expected me to do so. However, I did pretty well in my sales class, much better than anybody (including me) expected. This is news, because it raised some eyebrows, or was a surprise.

So, how does the jobless claim numbers look today? The number of U.S. workers filing new claims for unemployment benefits fell more than expected (and that’s what makes it a news) last week. Initial claims for jobless benefits fell 12,000 to a seasonally adjusted 631,000 in the week ended May 16, as compared to previous week’s figure of 643,000 (revised from 637,000).

The four-week average of new claims fell 3,500 to 628,500. Continuing claims rose 75,000 to a new record 6,662,000.

Not adjusted to reflect seasonal fluctuations, Michigan reported the largest jump in new claims (no surprise there) during the May 9 week due to a double-digit increase in layoffs in the struggling auto sector. Kentucky, Virginia, Indiana, Tennessee and Ohio also reported increases in layoffs in the auto sector.

So, the 12K drop is news…

Now, is this a good news? Let’s find that out. All we have to do it look at the leading stock indexes (isn’t INDICES the word?).

As of now (1:00 PM), the major stock indexes look like this

	Last	Change	% Chg
DJIA	8298.03	-124.01	-1.47
Nasdaq	1694.59	-33.25	-1.92
S&P 500	889.88	-13.59	-1.50
DJ Total Stock Market	9095.94	-145.60	-1.58
Russell 2000	480.01	-9.34	-1.91
Global Dow	1605.21	-22.44	-1.38
Japan: Nikkei 225*	9264.15	-80.49	-0.86
DJ Stoxx 50*	2098.76	-44.01	-2.05
UK: FTSE 100*	4345.47	-122.94	-2.75

So, the stock markets took a collective nose-dive after the disappointing unemployment claims. It is because even though the number of claims were down this past week, they have been at a record high in the last few months. However, more importantly, one more thing has effected the stock market. Former Federal Reserve Chairman Alan Greenspan suggested that the financial crisis has yet to end.