Today the Department of Labor reported their weekly jobless claims, which have gone down back to back weeks now.
“In the week ending March 7, the advance figure for seasonally adjusted initial claims was 211,000, a decrease of 4,000 from the previous week’s revised level. The previous week’s level was revised down by 1,000 from 216,000 to 215,000”
One of the reasons why I have stressed that a lot of the Pre coronavirus economic data has been good is that people need to know that certain data lines will not show the virus impact yet, but it will come. The question is how much of a negative result we will see with a virus that I believe in 6 months or less we should have better news on the virus outbreak. By September 1st, if the infection is much worse than today, then we have more significant problems to deal with.
On jobless claims. One thing that I have been focusing on since 2019 is that jobless claims had formed a bottom in 2019, and they’re deficient.
In the upcoming weeks and months, this data line will show the virus impact. Also, the deflationary oil war between Russia and Saudi Arabia will impact the oil sector as well.
One of the reasons I have talked about 2 of my last 3 recessionary flags being raised is that both PMI/ISM data and jobless claims will be hit, impacting Leading Economic Indicators, which falls noticeably before each recession.
Recession Flag 6 = Supply Spike due to a lack of demand event (Virus Raised)
Recession Flag 4 = Leading Economic Indicators to fall 4-6 months (Hasn’t hit this data line yet)
KEY: -> However, the velocity of the decline can have a 2-3 month impact per each monthly report.
Even though this data line is working from an All-Time High, its a pre virus chart. This event has a high-velocity factor, hence why I called it the Chaos theory and the Butterfly effect back on February 3.
“In chaos theory, the butterfly effect refers to the idea that due to the interconnectedness of all things, a small event can result in significant effects on a nonlinear, dynamic system.”
“The butterfly effect gets its name from the metaphor that even small swirls of air caused by the flapping of a butterfly’s wings can change the path of a tornado, also though the system is far removed in space and time from the first event.”
“In many ways, we see this theory manifest in the U.S. bond and stock market – a dynamic system that is prone to the influences of distant perturbations.”
Even the 2020 forecast article written last December had the concern of headline risk.
The 2020 forecast written back in December of 2019, had a headline risk theme.
“The stock market is at all-time highs. This means we are vulnerable to pullbacks, perhaps even a 10% plus correction, something that didn’t happen once in 2019.”
“Any stock market sell-off, correction, or near-bear market can drive money into bonds short term. With many headline-driven risks in play next year, don’t ignore the lower end of my bond market channel just yet.”
Today the 10-year yield is at 0.70% currently, we breached into my recessionary yields this week between -0.21% – 0.62% basis point with a 0.32% print earlier this week.
Because this virus has a high-velocity data factor to it, it can get negative quickly and recovery quickly as well. When the world defeats the virus, and in time people will go to events, travel, and eat out again like normal. Kids will go to school and be able to visit their grandparents without fear. In time, this will happen. Here is an excellent example of what is to come in America. Once more testing is done, our confirmed cases will rise noticeably, then, the new cases will fall.
Humanity will defeat this virus, America will still move on from this horrific event.
As always, show discipline, be the detective, not the troll. Keep your emotions in check, this is where the training comes in. The next 6 months are going to be really tricky on how deep this virus will affect the U.S. economy because of the many moving parts here. While it is true that the recent data has been reliable, the storm is coming. However, in time the world and America will defeat this virus. One thing that will be positive in the future. The world will have a better response to any significant outbreak in the future after this event.