Economic Indicators : **** Employment report ****
Official name: Employment Situation
What exactly? A measure of net new jobs created. Also measures the unemployment rate, average hourly earnings and the length of the average workweek.
Source: Labor Department
Frequency: Monthly
Released when? First Friday of the month at 8:30 a.m. Eastern. Data for prior month.
Market importance: High. Almost always moves markets. Very timely. Contains information about both job and wage growth and is considered the single best measure of the health of the economy. The tone of the employment report generally sets the tone for the other economic indicators that are released throughout the month.
Other notes: (a) Two key pieces of this report -- the unemployment rate and average hourly earnings -- appear in many inflation models. And various pieces of this report are used to help predict a host of other economic indicators. Average hourly earnings are used to help predict both personal income and the wages and salaries component of the * Employment Cost Index. The index of aggregate manufacturing hours is used to help predict industrial production. The change in construction jobs is used to help predict both housing starts and construction spending. (b) For average hourly earnings, the headline number is the percent change from the prior month, but we also graph the year-on-year change. That way you can see the rate at which earnings are increasing or decreasing.
** Initial Jobless Claims
What exactly? A measure of the number of people filing first-time claims for state unemployment insurance.
Source: Labor Department
Frequency: Weekly
Released when? Thursday at 8:30 a.m. Eastern. Data for week ended prior Saturday.
Market importance: Some. Occasionally moves market. Timely. Considered a good gauge of the condition of the labor market and good indicator of the tone of the employment report.
Personal Income and Consumption
Official name: Personal Income and Outlays
What exactly? A measure of changes in personal income and personal consumption expenditures (or spending).
Source: Commerce Department
Frequency: Monthly
Released when? First business day of the month at 8:30 Eastern. Data for two months prior.
Market importance: Some. Considered somewhat dated (employment report already indicated income and retail sales report already indicated consumption) but occasionally moves markets -- consumption typically accounts for roughly 68% of gross domestic product. Attained a somewhat higher profile in February 2000 when the Federal Open Market Committee began forecasting inflation in terms of the personal consumption expenditures deflator -- a component of the report -- instead of the timelier Consumer Price Index.
Other Notes: Report also includes a measure of the personal saving rate.
Retail Sales
Official name: Advance Monthly Retail Sales
What exactly? A measure of sales at retail establishments. Does not include spending on services.
Source: Census Bureau
Frequency: Monthly
Released when? Around the 12th of the month at 8:30 a.m. Eastern. Data for prior month.
Market importance: High. Nearly always moves markets. Very timely -- usually released just two weeks after the month ends. Also sets the tone for personal consumption expenditures to be released later in the month -- and hence gives a peek at a good chunk of gross domestic product.
Other notes: The headline number is the percent change from the previous month, but we also graph the year-on-year change. That way you can see the rate at which sales are increasing or decreasing.
gross domestic product
What exactly? A measure in the change in the market value of goods, services and structures produced in the economy.
Source: Commerce Department
Frequency: Quarterly
Released when? At 8:30 a.m. Eastern. The first-pass estimate of GDP is called the advance report and is released on the last business day of January, April, July, and October (data for prior quarter). The second-pass estimate is called the preliminary report and is released a month later; the third-pass estimate is called the final report and is released yet another month later.
Market importance: High. The actual pace at which the economy is growing or shrinking -- especially as it relates to expectations -- frequently moves markets.
Other notes: (a) The GDP release also includes a key inflation measure called the price index for gross domestic purchases. It measures the prices of everything -- including imports -- that Americans buy. (b) Personal consumption expenditures typically account for roughly 68% of GDP. Investment, government spending and net exports account for the rest.
** Consumer Price Index...CPI
What exactly? An index (1982-84 = 100) that measures the change in cost of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, entertainment and education.
Source: Labor Department
Frequency: Monthly
Released when? Around the 15th of the month at 8:30 Eastern. Data for prior month.
Market importance: High. Timely. All inflation measures routinely move markets.
Other notes: (a) The "core" CPI excludes the often-volatile food and energy sectors and gives a clearer picture of the underlying inflation trend. (b) The CPI for medical care is used to help predict the benefit costs portion of the employment cost index. The CPI for gasoline is used to predict the gasoline stations portion of the retail sales report. The CPI for new vehicles is used to predict the vehicle portions of the retail sales and personal income and consumption reports. (c) The headline number is the percent change from the prior month, but we also graph the year-on-year change. That way you can see the rate at which consumer inflation is increasing or decreasing.
** Housing Starts
Official name: Housing Starts and Building Permits
What exactly? Measures privately-owned housing units started (commonly known as just housing starts). Also measures privately-owned housing units authorized by building permits (commonly known as just building permits). Geographical breakdown provided for both starts and permits.
Source: Census Bureau
Frequency: Monthly
Released when? Around the 18th of the month at 8:30 a.m. Eastern. Data for prior month.
Market importance: Some. Sometimes moves markets. Considered good leading indicators of home sales and spending in general. Starts used to predict the residential investment portion of gross domestic product.
Other notes:(a) Permits typically translate into starts in roughly three to four months -- they are also a component of the leading economic indicators index. (b) Single-family starts typically account for roughly 74% of all starts. Multi-family units account for the rest.
** Industrial Production and Capacity Utilization
Official name: Federal Reserve Statistical Release G.17
What exactly? A measure of the change in the production of the nation's factories, mines and utilities. Also includes a measure of their industrial capacity and how much of it is being used (commonly known as capacity utilization).
Source: Federal Reserve
Frequency: Monthly
Released when? Around the 15th of the month at 9:15 a.m. Eastern. Data for prior month.
Market importance: Much. Frequently moves markets. Timely. Considered a key factory-sector gauge. Capacity utilization considered a telling inflation indicator.
Other notes: (a) The level of industrial production divided by the level of industrial capacity equals the capacity utilization rate. (b) The headline numbers are the percent change in production from the prior month and the capacity utilization rate. We also graph the year-on-year change in both production and capacity, alongside capacity utilization, to illustrate the relationship between the three.
** Purchasing Managers' Index
Official name: NAPM Report on Business: Manufacturing
What exactly? A national manufacturing index based on a survey of purchasing executives at roughly 300 industrial companies. Signals expansion when the PMI is above 50 and contraction when below.
Source: National Association of Purchasing Management (NAPM)
Frequency: Monthly
Released when? First business day of the month at 10 a.m. Eastern. Data for prior month.
Market importance: High. Nearly always moves markets. Extremely timely -- and this is the king of all manufacturing indices. Considered the single best snapshot of the condition of the factory sector.
Other notes:The NAPM calculates nine different sub-indices. These include new orders, production, employment, supplier deliveries, inventories, prices, new export orders, imports and backlog of orders. The production index is used to help predict industrial production. The prices index is used to help predict the Producer Price Index. The new orders index is used to help predict factory orders. The employment index is used to help predict manufacturing employment. And the supplier deliveries index is a component of the leading economic indicators index.
** Producer Price Index
What exactly? An index (1982 = 100) that measures the change in prices received by domestic producers of commodities in all stages of processing (crude materials, intermediate materials, and finished goods).
Source: Labor Department
Frequency: Monthly
Released when? Around the 13th of the month at 8:30 Eastern. Data for prior month.
Market importance: High. Timely. All inflation measures routinely move markets.
Other notes: (a) The "core" PPI excludes the often-volatile food and energy sectors and gives a clearer picture of the underlying inflation trend. (b) The headline number is the percent change from the prior month, but we also graph the year-on-year change. That way you can see the rate at which wholesale inflation is increasing or decreasing.
** Money Supply
Money supply is measured in a variety of ways, but the most widely cited measurements are M1, M2 and M3 -- the "monetary aggregates." M1 is chiefly currency in circulation and bank checking accounts. M2 is M1 plus savings accounts, CDs under $100,000, retail money-market fund shares and overnight repurchase agreements. M3 is M2 plus CDs over $100,000, institutional money-market funds and term repurchase agreements.
The Fed sets target ranges for the growth rates of M2 and M3. The 1999 ranges are the same as 1998's: 1% to 5% for M2, and 2% to 6% for M3. In 1998, M2 grew 8.5%, while M3 grew 10.9%. In 1999, M2 is growing at a 3.4% pace, while M3 is growing at a 3.7% pace.
Money-supply growth depends on interest rates, specifically the fed funds rate. Raising the fed funds rate curbs money supply growth, while cutting the rate accelerates it.
From 1979 to 1982, monetary policy focused on achieving a certain rate of M1 money supply growth. Changes in demand for money (loan demand) were allowed to influence the fed funds rate. For example, if money supply growth outpaced the target rate, the Fed would raise the fed funds rate to curb it. This reflected the monetarist tenet that the money supply is the main determinant of economic activity.
The Fed stopped targeting money supply growth and started targeting the fed funds rate because, it explains, "the combination of interest rate deregulation and financial innovation disrupted the historical relationships between M1 and the objectives of monetary policy." In other words, the development of new types of financial products complicated measurement of the money supply. |
