James Picerno | Jul 12, 2012 12:30PM ET
Yesterday I profiled the trend for a broad mix of economic and market indicators and reasoned that the case for expecting a new recession was still weak. Today’s weekly update on initial jobless claims supports that view: new claims dropped a hefty 26,000 last week to a seasonally adjusted 350,000 -- a new four-year low. Taken at face value, this looks like extraordinary news. The reality, however, may be far less encouraging. Last week's decline is of questionable relevance because of a rather large seasonal adjustment that’s built into the calculation due to routine July shutdowns of auto plants for retooling.
“You can never take claims at face value because of the July shutdowns,” warns Jonathan Basile, an economist at Credit Suisse. David Sloan, a senior economist at 4Cast Inc., bluntly advised ahead of the release that today’s claims numbers will be “misleading.”
The Big Picture
In fact, there’s minimal sign of cyclical trouble across a broad spectrum of economic and financial market indicators. That's not the same as saying that all's well -- it isn't -- or that there are no serious risks lurking -- there are. But if we're trying to gauge recession risk, it's still reasonable to expect more of the same -- moderate growth.
Let’s see how the revisions on claims fare and what other economic reports in the days and weeks ahead reveal. Meantime, one thing is clear: It’s still premature to argue, based on the numbers published so far, that the economy has already slipped into a new recession or is in high danger of tumbling in the immediate future.
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