Jobs: The laggingest indicator

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The Conference Board’s monthly Leading Economic Index came out today. It was up on the month for the first time since June 2008, and while forecasters had expected a rise it was bigger than the consensus estimate. So yay, right?

But markets were down after weekly jobless claims—one of those indicators that make up the Leading Index—remained stubbornly high.

This is turning into the story of the incipient recovery, or perhaps the incipient non-recovery. Lots of things about the economy seem to be getting better, but the job market remains absolutely dismal. Someday one of these trends is going to have to give, and it’s far from certain that it will be the bad job market that cries uncle. That’s apparent when you take a look at what makes up the Leading Economic Index—three of the seven positive readings this month (stock prices, the interest rate spread, and the index of consumer expectations) were about sentiment as much as reality, and a fourth was average weekly jobless claims, where after an encouraging month the trend may now be shifting back in the wrong direction.

Sentiment shifted because the economy, after following a trajectory for a few months that would have brought us back to the Iron Age before long, now appears to be in more of a garden-variety decline. As a result, many people and companies have been positively surprised. Such sentiment shifts and moderations in the curve of economic decline have in the past usually presaged recoveries. If the job market stubbornly fails to improve, though, sentiment will falter again, and who knows what’ll happen after that. My bet is that we still get a recovery. Just not a very fun one.

By the way, I normally find looking through the latest economic data to be about the most boring, pointless activity imaginable. But at the moment it’s really pretty suspenseful.