Positive Signs For the Economy, in Two Charts

By Robert Hughes

With the backdrop of mixed economic signals in recent weeks, two reports this week suggest some good news for U.S. consumers.

The weekly report on initial claims for unemployment insurance declined in the latest week, to 259,000 from 277,000, bringing the four-week average down to 267,500 from 270,000. The four-week average has been below the important 300,000 level for 10 straight months. A low level of unemployment insurance claims suggests employers are not laying people off as quickly and is a positive sign for the labor market. That’s in addition to the upbeat monthly jobs report we got from the Bureau of Labor Statistics last week.

On the inflation side, retail gas prices may have ticked up slightly in recent weeks, but the latest reading on crude oil stocks in the U.S. suggest prices are likely to remain tame. Crude oil stocks excluding the Strategic Petroleum Reserve are at a record level. By looking at the chart below, you can see what tends to be an inverse relationship between crude stocks and gas prices. And when gas prices are low, Americans tend to feel better about the economy. That optimism is usually good for consumer spending:

The combination of a positive outlook for the labor market and low energy prices are two positive signs for consumer spending and the overall economy.

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Robert Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.