September Leading Indicators, October UI Claims

October 19, 2017
By Robert A. Dye, Ph. D.

Data Still Muddied from Storms

  • The Conference Board’s Leading Economic Index for September decreased by 0.2 percent.
  • Initial Claims for Unemployment Insurance fell by 22,000 for the week ending Oct. 14, to hit 222,000.

 

The Conference Board’s Leading Economic Index decreased by 0.2 percent in October. The Coincident Economic Index gained only 0.1 percent for the month, while the Lagging Index declined by 0.1 percent. Insome situations, the three soft readings in the September economic indexes might be cause for alarm. However, in the September data, we see many signs of hurricane effects which will be reversed in the months ahead. It is fair to say that the Leading Index for September is simply not a leading index due to the impact of Hurricanes Harvey and Irma. Even though the Leading Index declined for the
month, six of the 10 subcomponents were positive. In order of positive contribution, they were ISM new orders index, interest rate spread, credit index, stock prices, consumer expectations and manufacturers’ new orders for consumer goods. The four negative factors were unemployment insurance, residential
building permits, manufacturing hours and manufacturers’ new orders for nondefense capital goods excluding aircraft. Three of those four negative factors were pulled more negative by the storms. Unemployment insurance claims increased in Texas and Florida after the hurricanes, residential construction was obviously delayed, and manufacturing hours were dragged down due to refinery
and plant closures. We will heavily discount the first negative reading in the Leading Index since August 2016. We expect to see a return to a positive trend very soon.

Recent labor market indicators have been distorted from the storms. In October, we see a significant decrease in unemployment insurance claims as that data stream renormalizes after significant increases in late August and September. Initial claims for unemployment insurance fell by 22,000 for the week ending October 14, to hit 222,000. Texas and Florida both saw large declines in initial claims in mid-October. Unfortunately, Puerto Rico saw a sizeable increase. Continuing claims fell by 16,000 for the week ending October 7, to hit 1,888,000.

Market Reaction: Equity markets opened with losses. The 10-Year Treasury bond yield eased to 2.31 percent. NYMEX crude oil is down to $51.37/barrel. Natural gas futures are down to $3.03/mmbtu.

For a PDF version of this report click here: Leading_Indicators_10192017.

 

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