Auto sector’s effect on non-recession reading
This daily will have to be quick since I am in transit. The best highlight here is jobless claims and how the auto sector is affecting both production and employment positively, potentially keeping the US from falling into outright recession. I mentioned just over a week that auto inventory restocking was the only thing between US and recession. Retail sales have been negative for three straight months and the manufacturing PMI has fallen into negative territory as well. Particularly alarming with the last manufacturing PMI was the drop in new orders. All of this speaks to recession.
But auto companies are building inventory by getting workers to work through the typical summer re-tooling period and that’s throwing off jobless claims:
The reading for jobless claims has been volatile this month because of the timing of the annual auto plant shutdowns for retooling. The number of new claims had touched a four-year low in the July 7 week at 352,000. One measure that tries to smooth out this volatility, the four-week moving average, fell 8,750 last week to 367,250.
"The good news there is on average over the last four weeks the number is improving," said Art Hogan, managing director of Lazard Capital Markets in New York.
This year, automakers are carrying out fewer temporary plant shutdowns, throwing off the model the department uses to smooth the data for typical seasonal patterns.
A Labor Department official said they were still experiencing volatility related to the auto layoffs that usually happen at this time of year. Otherwise, the data had few blips.
I should note that Ford announced earnings with weakness in Europe dragging down results. I expect this to move to the US, leading to lower production and worsening jobless claims.