The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Initial Jobless Claims were a huge positive surprise, totaling just 407k, well below expectations of 435k and down from 441k last week. The last time we saw a level this low was July ’08 and it brings the 4 week average down to 436k from 444k. Continuing Claims fell by 142k and Extended Benefits fell a net 262k. Bottom line, there is a clear improvement in the level of firings, and thus those applying for benefits, and we’ll see with next Friday’s Nov Payroll # how much new net hiring has followed. The important factor coming up that will impact Extended Benefits is the Nov 30th expiration of the last extension of unemployment benefits and that may cause about 2mm people to lose this insurance program. This is a large number but there are currently 3mm job openings in the economy right now. This is a simplistic look I know but my point is, don’t assume no one will be able to find new jobs rather quickly.

Oct Durable Goods were well below expectations as orders fell 3.3% headline, 2.7% ex transports and 4.5 non defense capital goods ex aircraft. The consensus for all three was for gains of .1% to 1%. However, Sept figures were revised all higher by a good amount, so taken together the data was still weaker than thought but not as much as the Oct data implies. The declines for Oct were broad based and Shipments, which follow orders and get directly plugged into GDP, fell by .9%. Because inventories rose while shipments fell, the inventory to shipments ratio rose to 1.61 from 1.59, the highest since Aug ’09. Bottom line, while the revisions in Sept helped to mitigate the Oct decline, inventory levels have mostly normalized after the nice lift the build gave to GDP over the past few yrs. Thus, a big pick up in new orders from here will have to happen in conjunction with further improvements in end demand, which hopefully will continue.