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Jobless Numbers as Economic Beacons

by Travis Pantin
Fri, 21 Dec 2007 at 12:09 PM

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"If there's any one still wondering if the economy's slowing, this morning's update on weekly jobless claims may help blow some of the clouds of doubt away," the editor of the Capital Spectator, James Picerno, wrote yesterday.

Jobless claims grew to 346,000 for the week through December 14, according to data released by the Labor Department on Wednesday. The 10-week moving average of new weekly filings for unemployment insurance rose to 334,500, the highest in two years.

Yesterday's number was "not the high point in recent history, which was November 14's 353,000. Nonetheless, the trend is telling," Mr. Picerno wrote.

He added: "Given the broader economic context of late, which is less than encouraging, the warning sign emanating from the jobless numbers today suggests that the risk of trouble for 2008 is still rising."

Mr. Picerno recommended keeping a close eye on the incoming economic numbers: "We're all still data dependent, and the forecast calls for more of the same well into the new year."

The Bespoke Investment Group was not afraid of addressing the big question on everyone's mind: What do the jobless claims numbers say about the possibility of a recession? On its blog, Think Big (snurl.com/1vmhi), the group presents a historical chart of jobless claims that shows the economy could be much worse off still. "The current level of initial jobless claims remains below the levels it was at when the last four recessions began," the blog says. "While things could certainly get worse over the next several weeks, current levels of initial jobless claims are still not quite in 'recession' territory."

CRITIQUING JIM CRAMERSTYLE INVESTING ADVICE
On Market Movers, Felix Salmon offers a critique of Jim Cramer-style investment advice.

Mr. Cramer, in pitching his latest book, recently claimed that those "Cramerites" willing to do the necessary research would find his advice helpful for building a far-sighted and diversified portfolio.

Mr. Salmon is skeptical: "Who are these people who are helped by a show starring a man who makes Steve Ballmer look like a Zen master? Personally, I have no idea. But in Cramer's mind (or at least in Cramer's sales pitch) they are the elite — the people who do their homework, the 'Cramerites willing to do the research.' For them, Cramer will blurt out buy and sell recommendations a fraction of a second after being given a stock ticker symbol over the telephone. Quite how that's supposed to 'help construct a long-term, diversified portfolio,' I have no idea."

Index funds, though less exciting, are probably a much smarter way to go, Mr. Salmon suggests.

WHY EBAY HAS NO COMPETITION
At 26econ.com, Aaron Schiff writes that eBay should "be worried about coming under scrutiny from competition authorities." Mr. Schiff says he doesn't suspect eBay of illegal behavior, but he does think its model makes it difficult for other online auction sites to get established.

"EBay 'owns' the reputations of its users. If you want to switch to an alternative site, you have to start from scratch with a blank reputation," Mr. Schiff writes. That makes it difficult for other auction sites to get off the ground.

Mr. Schiff links to a study that quantifies the benefit, at least to sellers, of having a good reputation on eBay.

"I can quite easily see some competition authority making the argument that eBay's control of these reputations restricts competition among online auction sites. I don't know whether this argument would hold water when subject to close analysis, but there's clearly a risk to eBay that it could come under pressure to allow 'reputation portability,' much as telecommunications firms are subject to 'number portability' to promote competition," Mr. Schiff writes.

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