Which Economic Indicators Matter?
by Charles Rotblut, CFA and Aaron Smith
Aaron Smith is a senior economist for Moody’s Economy.com. He spoke to me recently about the economic indicators he watches and what they may be signaling for the direction of the economy and markets.
—Charles Rotblut, CFA
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Charles Rotblut (CR): What economic data do you consider to be the most important to look at?
Aaron Smith (AS): The data on employment is key because the jobs being created are what will generate the income necessary for spending. It’s that cycle that we need. You hear the term “escape velocity” for the phase when spending and hiring start to reinforce one another. It’s also the same point at which we typically say a recovery has made the leap to an expansion.
The weekly data on jobless benefit claims is really the best, most timely data that we have. It’s extremely accurate because it’s an actual count. It’s weekly versus monthly, and the data really gives us a feel for where labor conditions are in real time.
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Aaron Smith is a senior economist for Moody’s Economy.com and associate editor of the North American edition of the Dismal Scientist website, producing real-time online commentary and weekly analysis on the U.S. macroeconomy.
Discussion
I am wondering "how jobs created...generate income necessary for spending"?
Option 1: If the govt. creates the jobs by waving a magic wand and says - build a bridge here, a dam there, etc then the govt has to borrow the money at interest from the Federal Reserve. Money is printed = inflation+debt, so everyone's existing currency is devalued and if americans are responsible for the debt, more enslaved. All that is really created is a transfer of wealth from what already exists to another, albeit involuntarily.
Option 2: A private business expands, and opens an xyz store. This store hires people, does business. XYZ can only reduce the amount of money other stores (recipients) might get by increasing the number of places the existing money can be spent. If there is one store in town it might do well, if there are 5,000 they might all be in poverty or in the unemployment line.
So how are these jobs being created (obamtronic magic wand?) and where is the money coming from (borrowed, debt, inflation or existing thereby diluting the amount that might be spent in existing businesses)?
posted about 1 year ago by Oh Yeah from Hawaii
How about making this article practical by citing websites where this data may be found!
posted about 1 year ago by John from Washington
I spent 15 minutes to read and understand. I still don't have a clue on specific indicators /sectors to look at.
Can someone help?
posted about 1 month ago by Vaidy Bala from
I spent 15 minutes to read and understand. I still don't have a clue on specific indicators /sectors to look at.
Can someone help?
posted about 1 month ago by Vaidy Bala from
I spent 15 minutes to read and understand. I still don't have a clue on specific indicators /sectors to look at.
Can someone help?
posted about 1 month ago by Vaidy Bala from
Vaidy,
The indicators Aaron listed as most important are employment stastics (the monthly jobs reporta weekly initial jobless claims) and the Institute for Supply Management (ISM) surveys.
-Charles
posted about 1 month ago by Charles Rotblut from Illinois
