The Associated Press may be down to one person in the whole wide world who will tell its economics reporters what they want to hear when the federal government releases economic data. That's what you almost have to conclude after reading the wire service's reports on two of Thursday's major releases, namely last week's initial unemployment claims and December's durable goods orders and shipments.
The only outside source AP reporters Christopher Rugaber and Martin Crutsinger consulted in their respective reports about initial claims and durables was one Ian Shepherdson, chief economist with Pantheon Macroeconomics. Naturally, Sheperdson was sunnyside-up despite relatively troubling news in each area.
Granted, Mr. Shepherdson has a good track record, given that he was "the 2014 winner of the Wall Street Journal’s annual U.S. economic forecasting competition, having previously won the contest in 2003." That's fine, but he's not infallible, and the pair's failure to consult with anyone else is odd at the very least. Or, perhaps, their failure to report what others had told them because it might have been unpleasant.
Here's what Shepherdson had to say about initial unemployment claims, which came in at a seasonally adjusted 278,000 last week, in Rugaber's report (bolds are mine throughout this post):
"The data suggest that the trend in claims hasn't risen much, despite the miserable performance of the industrial economy in the final few months of the year," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in an email. "There's a good reason for this; most people don't work in industry or oil, and the rest of the economy is doing much better."
Just a minute, pal. Something happened last week that hasn't happened for quite some time during a full business week. Quoting from the Department of Labor's related report:
UNADJUSTED DATA:
The advance number of actual initial claims under state programs, unadjusted, totaled 296,817 in the week ending January 23, a decrease of 81,930 (or -21.6 percent) from the previous week. The seasonal factors had expected a decrease of 64,643 (or -17.1 percent) from the previous week. There were 281,885 initial claims in the comparable week in 2015.
Current year actual claims exceeded those seen during the comparable week in 2015. That's the first time current year weekly claims have been greater than the comparable week in the previous year in a long time, and the margin (5.2 percent) was not small. It's a little early to tell, but this development in a data point everyone seemingly assumed would continue to improve indefinitely year-over-year may be a harbinger of the end of 200,000-plus months of seasonally adjusted job growth — or worse. It may also be an indicator that "the rest of the economy" may not be "doing much better."
Additionally, as the contrarians at Zero Hedge pointed out Thursday morning, the four-week average of initial claims has been sneaking upward for about three months. It's not quite at an alarming level just yet, but the potential is there if this year's raw claims continue to exceed last year's figures during the next several weeks.
Here's what Shepherdson told Crutsinger in reacting to today's awful durable goods report, which featured a 5.1 percent drop in seasonally adjusted orders from November to December, a 2.2 percent drop in shipments, and almost no drop in inventories, which are far higher than they should be considering the cratering which has been occurring in orders and shipments:
Ian Shepherdson, chief economist with Pantheon Macroeconomics, noted that the big drop in December orders was influenced by some one-time factors, including a swing in the mix of orders to Boeing in December to lower-valued 737s.
He attributed the plunge in the investment category to the decline in oil prices to around $30 per barrel, down from around $50 per barrel in the late summer and early fall. That triggered further cutbacks in investment in the oil and gas industry, he said.
"No one should be surprised that manufacturing is fundamentally weak, given the oil hit and the strong dollar," he said.
As I have noted on several occasions, the "strong dollar," weak overseas economies, and low oil prices have been the go-to excuses for several months now when the government releases weak reports about the economy. Seldom does anyone admit that the U.S. economy's weakness — particularly in manfuacturing, but also to an extent elsewhere — has to be relevant, given that international trade, while important, is not a dominant factor in the economy. Shepherdson would not acknowledge that the domestic economy is weak. Sorry, it is, and the detailed information in the durables good report demonstrates that. As I noted earlier today at my home blog:
November's original values for new orders, shipments, and unfilled orders were all revised down, while inventories were revised up. Orders went from flat to -0.5 percent.
Year-over-year, December 2015 compared to December 2014 (not seasonally adjusted, pending future revisions to Dec. 2015) was just awful:
- Orders — down 1.7 percent.
- Shipments — down 3.3 percent.
- Unfilled Orders — down 1.9 percent.
- Inventories — down 0.1 percent.
Comparative annual totals were also unimpressive (pending future revisions to Dec. 2015):
- Orders — Down 3.5 percent in 2015.
- Shipments — Up 1.4 percent in 2015.
I'm sorry, you can't blow off terrible results like these and blame it all on the rest of the world. The U.S. economy is currently weak, and arguable getting weaker. Zero Hedge contends that today's durables report "screams recession." That may or may not be true, but it sure as heck doesn't scream robust health.
The suspicion here is that Rugaber and Crutsinger sought or found comments made by others, and didn't find that they would be helpful in furtherance of their goal to fool Americans into thinking all is well. It's not, and Ian Shepherdson alone saying things are fine doesn't make it so.
Cross-posted at BizzyBlog.com.
