Suitably Flip

Tuesday Economic Data Dump: Stinky

A double dose of gloom this morning, including consumer confidence, which dipped from 61.8 to a 7-month low of 58.5 (economists expected 60.8) and the Case-Shiller home price index, which fell 3.96% in April (slightly worse than expected).  The prior month's decline was also revised from -3.61% to a somewhat worse -3.77%.

The market is largely shrugging it off, based (once again) on the great Greek hope.

Update:  Hide the decline!

Ed at Hot Air notes that Reuters strains mightily to spin the housing data into good news, trumpteing the fact that "the pace of decline in home prices moderated in April."

Well, sort of.

The year-over-year decline for April was (as stated above) 3.96%, worse than expectations and worse than last month's decline (both revised and unrevised).  That sounds an awful lot like an accelerating decline.

But Reuters is hanging their claim on the change in the month-over-month decline, a less-watched indicator that will tend to jump around in the wake of data revisions.  And indeed, by that measure, the index fell just 0.1%, less than the previous month's month-over-month slip of 0.3%.  But it's worth remembering that the improvement slower month-to-month worsening arises courtesy of the above-noted downward revision of the previous month.

In other words, as long as you shrug off the headline number and cherry pick your datapoint, you can indeed find your way to a decelerating decline, by virtue of the fact that the prior month was even worse than originally reported.

Where's the champagne?

And of course, this doesn't account for next month's revision of today's data, which (given the scale of today's revision) might be expected to show not a decelerating, but a stagnant or even accelerating decline, even by the metric Reuters has decided to prefer.

FoxNews.com Live 9-10

I'll be on FoxNews.com Live this morning from 9-10.

Topics to include the GOP horse race and the role of taxes and entitlement reform in the debt ceiling debate.

If you miss it live, the show will be available at the link until 5 pm (dial the tape back to 00:00:00).

Update:  A clip, in which I pooh-pooh Michele Bachmann (a little).

Jobless Thursday

On the heels of yesterday's afternoon sell-off following Uncle Ben's rather gloomy assessment of economic conditions, this morning's unemployment report gave the markets another reason to jeer.

In the week ending June 18, the advance figure for seasonally adjusted initial claims was 429,000, an increase of 9,000 from the previous week's revised figure of 420,000. The 4-week moving average was 426,250, unchanged from the previous week's revised average of 426,250.

Economists expected a slight downtick to 413,000.

Major indexes shed more than 1% right out of the gate, bringing their declines from yesterday, 2ish (pre-Bernanke), to more than 2%.  That leaves them just a fraction of a percent above fresh multi-month lows, just as we slide into new home sales data at 10 am.

Sales in May are seen dipping from 323,000 to 305,000.  Anyone want to take the over on that one?

Update:  If you said yes, good on you.

Sales of new single-family houses in May 2011 were at a seasonally adjusted annual rate of 319,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.1 percent (±10.7%)* below the revised April rate of 326,000, but is 13.5 percent (±13.6%)* above the May 2010 estimate of 281,000.

In other words, "slightly less horrible than expected."

The Dow and S&P 500 recovered a touch from their worsening rout to a mere -1.4% for the day.

Fed States the Obvious (and the Not So Obvious)

Bernanke has just started his presser, following the Fed's latest policy statement, which gave grave voice to weakening economic data.

The Federal Reserve’s outlook on the U.S. economy is gloomier than it was two months ago, the committee that manages the central bank’s monetary policy said Wednesday, reiterating plans to keep interest rates near zero and to end its $600 billion Treasury bond purchasing program.

The Fed’s Federal Open Market Committee said in a statement that while “the economic recovery is continuing at a moderate pace,” it is happening “somewhat more slowly” than had been expected.

Signs in the labor market of a recovery have been “weaker than expected,” the committee said.

Equally no-brainerishly, they've reduced 2011 growth forecasts, though probably not enough. 

The Federal Reserve cut its economic growth forecast for the second time this year, reducing its estimate of 2011 gross domestic product growth to a range of 2.7% to 2.9%, down from 3.1% to 3.3% in April and 3.4% to 3.9% in January.

Meanwhile, despite inflation coming in hotter than expected, Bernanke says he expects it to ease off, good news (if true) given that he remains committed to keeping rates at historic lows for an indefinite "extended period" of time.

He credits ongoing Fed asset purchases with thwarting the erstwhile deflation risk, so I'm not totally clear on why he wouldn't be a tiny bit more concerned that they may likewise be engendering inflation risk.

Michael Kinsley Now Transcibing Presidential Speeches

At whitehouse.gov, via Drudge:

The White House
Office of the Press Secretary

For Immediate Release        June 20, 2011
Remarks by the President at a DNC Event

Mandarin Oriental Hotel
Washington, D.C.

9:06 P.M. EDT
...

Over the last 15 months we’ve created over 2.1 million private sector jobs. (Laughter.)

Belated: FoxNews.com Live 9-10

I was on FoxNews.com Live this morning from 9-10.

Topics included the GOP horse race, Libya, and the Westboro Baptist Church.

If you missed it live, the show will be available at the link until 5 pm (dial the tape back to 00:00:00).

Here's a clip.

Jobless Thursday (With Housing, Philly Kickers); Update: Philly Lays an Egg

Stock futures are pointing lower again today, as it's looking unlikely that the only outcome capable of buoying equities (a widespread internet blackout preventing dissemination of another day's economic data) will come to pass.

Alas.

At 8:30, we'll get weekly unemployment claims, expected to sink from 427,000 to 421,000.  I'm going to go out on a very short limb and say last week's number will be revised upward to more than 430,000 and this week's will also be uglier than the consensus.  Let's say 430,000 even - that'd at least give us the illusion of a slight downtrend (until today's number is revised higher next week).

We'll also get a look at May housing starts and building permits.  Starts are seen growing from 523,000 to 540,000; permits look to fall from 551,000 to 548,000.  Given yesterday's news that builder confidence took a sudden turn for the sourer in June, the actual data may be less mixed than all that.

And at 10:00, we could get a real whopper.  The Philadelphia Fed will release its monthly Business Outlook Survey.  Its current activity index (the "survey’s broadest measure of manufacturing conditions") offers one of the clearest illustrations of the triple-dip problem.

Note the gray line below.

The shaded areas are recessions.  Current activity briefly fell below zero (i.e. to recession levels) during 2010's Recovery Summer^TM, then recovered smartly at the end of the year, before tanking even faster in recent months.

The index stood at a perilous 3.9 in May and economists expect it to recover modestly to 7 this month.  Given yesterday's hideous Empire State manufacturing index, this seems - to be charitable - unlikely.

Going out on an only-slightly-longer limb, I'm watching for this gauge not to rise, but to fall further today, perhaps back into negative territory.

If that happens, it really may be time to dust off the S word.

"I'll take Swords for $200, Alex."

Stay tuned!

Update:

Housing data is indeed not mixed, but the numbers are higher, not lower.

Starts jumped to 560,000 (slightly better than the expected jump, net of last month's revision), while permits increased to 612,000 (meaningfully better than expectations).

Update:

Unemployment claims declined to 414,000 from last week's upwardly revised 430,000.  The less volatile 4-week average was unchanged at 424,750.

The markets, um... don't care.  Futures extended their losses a bit in the minutes following the releases.  The AP says it's because of Greek debt worries.  But that's what they say every day.

Anyway, my pessimism is 0 for 2 thus far today.  Maybe Philly will surprise to the upside and give us a trifecta of win.

But don't hold your breath.

Update:

There we are.  With ten minutes to go before the opening bell, futures have pared their losses and are only down slightly.

Meanwhile, WSJ MarketBeat throws a little cold water on the better-than-expected housing data.

Housing starts rose 3.5%, better than expected to a 560,000 annualized rate. They were expected at a 548,000 annualized pace. Permits for new construction rose, too, up 8.7%. David Ader at CRT warns this was driven by multi-family construction, which may not be sustainable.

Update:

Well, called the whopper correctly.  Boy howdy. 

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 3.9 in May to -7.7, its first negative reading since last September.

Again, that compares to expectations of an increase to 7.0.  As illustrated below (again, in gray), negative current activity readings typically correlate very tightly with recessions.  At -7.7, the index is at its worst level (outside a formal recession) since October 2001.

Falling even faster was the future conditions index (below, in black), now sitting at a level well below where it averaged during the last two recessions.

Stocks immediately dove from positive territory to negative, before bouncing back above the center line.

More from MarketBeat:

Philly Fed has plunged from 43.4 in March. This 51.5-point drop in three months is the biggest on record going back to the 1960s.
...
This has got to downgrade the outlook for economic growth. How long will earnings and earnings expectations hold up in the face of much weaker than expected growth?
...
The stock market is still focused on hopes of another can-kicking European bailout from the IMF and/or China.

Stock Market Correction Watch

With today's data-driven cratering of the major equity indexes putting us back in the red week-to-date (on pace for a 7th consecutive down week), it's worth noting that we're now just two days like today away from a full-on correction of 10% from the late April highs.

A 10% slide would suggest Dow 11,529 (currently nearly 11,900, down from 12,810) and S&P 1,227 (currently near 1,266, down from 1,363).

However, I'd also note - for the countlessth time - that despite the selloff, the market is still 19-24% (depending on which index you favor) above its summer 2010 trough, when the economic data admittedly looked roughly as bad (but not much worse than, and in some cases better than) it does now.

Feels like there's plenty of room left to plummet.

Wednesday Data: Tuesday Was All a Dream

As noted yesterday, we got off to a somewhat-less-depressing-than-expected start to a week that promised another drubbing of sour economic news.  The markets ate it up, sending stocks higher by more than 1%, in hopes that the current "soft patch" might not bespeak something more pernicious.

Then Wednesday came.

Empire State Crumbles, Futures Tumble

The Empire State manufacturing index for June is out, and it’s ugly, coming in at -7.8, that’s negative 7.8, compared with expectations of 12, that’s positive 12.

Deutsche Bank economist Joltin’ Joe LaVorgna suggested yesterday that this could show the early signs of the factory sector bouncing back from the transitory Japan-caused soft patch. The Empire State isn’t a clear read on the factory sector, but this is not a good start.

Worse, the expectations index tumbled to its lowest level since March 2009, when we were still technically in recession.

Simultaneously, we got a look at retail inflation in May, which revealed both headline and core rates above expectations (0.2% and 0.3%, respectively, versus expectations of 0.1% for both).  Not terribly worrisome levels, but north of the tame pace expected and perhaps more surprising in light of yesterday's reading on wholesale inflation that came in slightly under forecast.

Dow futures promptly mounted a triple-digit retreat, threatening to wipe out all of yesterday's gains and put the index back under 12,000.

Until now, many had held that manufacturing remained the bright spot in an increasingly wobbly economy.  With this notable miss (and the concurrent inflation surprise), MarketBeat advises you to brace for the S word.

Core is up 1.5% year-over-year, which is still awfully low. Headline inflation was up 3.6% from a year ago. You’ll be hearing about stagflation this morning, probably, whether real or not.

But wait, there's more!

At 9:15, the Fed will release May data on industrial production and capacity utilization.  Expectations are for production growth of 0.2% (up from flat in April) and utilization of 77.0% (up from 76.9%).

If a downside surprise in those numbers confirms the Empire State's suggestion that manufacturing activity is indeed deteriorating, contractflation might be the better word.

Update:

Industrial production:  +0.1% (vs. +0.2% expected)
Capacity utilization:  76.7% (vs. 77.0% expected).  April revised down from 76.9% to 76.7%.

Worse than expected (as expected), but the headline production growth rate kept its head above water, which should keep the market from truly coming unglued.

(At least until tomorrow's unemployment and housing data.)

Update:

10:00 brought us a little teaser for tomorrow's housing data, as the National Association of Home Builders released its June Housing Market Index.  It's been stuck at 16 for 6 of the last 7 months and was expected to remain at that depressed level.

If only.

After holding at a low but steady level for the past six months, builder confidence in the market for newly built, single-family homes declined three points in June to a reading of 13 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The last time the index was this low was in September of 2010.
...
"Builder confidence has waned even further as economic growth has stalled, foreclosures have continued to hit the market and the cost of building a home has risen," agreed NAHB Chief Economist David Crowe.

That leaves the HMI tied (with the depths of "Recovery Summer") for its worst post-recession level and lends further support to the double triple dip thesis.

Housing Market Index

Obama: "One Term Is Enough"

That quote is only moderately out of context.

“I’m sure there are days where I say that one term is enough,’’ Obama said.

Not as startling as what he said next, though.

“What keeps me going is a belief that the work that we started in 2009 is not yet complete.’’

Since work began, unemployment has jumped from 7.2% to 9.1%, with the latest reading on job growth proving far slower than population growth.  Gas prices have fully doubled (from $1.85 to $3.71).  Housing has succumbed to a double dip, while economic output - having only enjoyed a single quarter of recovery-style growth in the seven since the recession ended - has nearly stalled once again.

Is the work almost complete?  Cause this work is kind of bumming people out.

Tuesday Data Jamboree

Unlike yesterday's refreshing paucity of economic news, this morning is chock full o' datapoints, which are off to an inauspicious start.

Consumer Spending Remains Weak: Small Business Optimism Dips Lower in May

The Index of Small Business Optimism fell 0.3 points in May to 90.9. This month marks the third monthly decline in a row. The proximate cause is the fact that 1 in 4 owners still report weak sales as their top business problem.
...
“Corporate profits may be at a record high, but businesses on Main Street are still scraping by,” said NFIB chief economist Bill Dunkelberg. “Washington is throwing misdirected policies at the problem, offering tax breaks for hiring and equipment investment, but acting surprised when they don’t bear any fruit. The failure to understand why small-business owners are not hiring or investing has resulted in a set of policies that have not been very effective, and Main Street is suffering. The icing on the cake: the growing debt, large deficits, threats of higher taxes, regulations being spewed out by state and local administrations, and the uncertainty of the new health care law—is it any wonder that optimism is down?”

The National Federation of Independent Business, which publishes the survey, calls 90.9 a "recession-level reading."

Still to come:

Retail Sales (8:30 am)
Previous: +0.5%
Market expects: -0.7%
Bold prediction: -1.2%

May auto sales will certainly contribute to the decline, given Japanese supply disruptions, and watch for that to be spun heavily.  But even ex-auto, the market is expecting growth to slow from 0.6% to 0.2%.  Expect the auto excuse to prevail even if the ex-auto number is 0.0% or worse.

Wholesale Inflation (8:30 am)
Previous: +0.8%
Market expects: +0.1%
Bold prediction: +0.3%

Core inflation (ex-food and energy) should show far less cooling (expected to tick down from 0.3% to 0.2% and I'd watch for it to stand pat or even tick up a touch).

Business Inventories (10:00 am)
Previous: +1.0%
Market expects: +1.0%
Bold prediction: +1.2%

I'm not actually that confident about this number beating expectations, but I throw down that marker as an excuse to rant about it a little.  While the spin on continued growth will be that it suggests economic expansion, bear in mind that inventory growth outpacing overall GDP growth is a red flag presaging likely slowdown on the horizon.

5 minutes before the 8:30 releases, stock futures are pointing higher by the better part of 1%.  Think they'll hold?

Stay tuned!

Update:

Retail Sales:
-0.2% (vs. -0.7% expected).
Last month's 0.5% increase was revised down to 0.3%.
Ex-auto, sales slowed to 0.3% (vs. 0.2% expected).

Wholesale Inflation:
+0.2% (vs. 0.1% expected).
Core inflation also rose 0.2% (as expected).

Given the market's willingness to cheer neutral news as good, shrug off bad news as neutral, and begrudgingly acknowledge horrible news as bad, I'm a little surprised that this mixed-at-worst* news isn't further boosting stock futures.  The Dow actually pulled back a bit following these two releases.

* "Mixed" versus expectations, that is.  Don't get me wrong.  The data continues to show us unambiguous signs of economic deceleration, which is hardly good (or even neutral) news.  But so far, today's releases have been somewhat less daunting than what investors had braced for (i.e. "Hooray, sales just turned lower but are declining slower than we feared!").  From a long-the-market perspective, that should be (a little bit) good.

Update:

Indeed, now futures are pushing a little higher.

Update:

Business Inventories:
+0.8% (vs. +1.0% expected).
March's 1.0% increase was revised up to 1.3%.

Thank God It's Monday

Stocks have (for at least part of the session) managed to keep their heads above water today, interrupting the 6-week losing streak wrought by the deluge of worsening economic data.

But to what do we owe today's refreshingly sideways move?

The lack of new data might have something to do with it.  While fresh looks at retail sales, inflation, industrial production, housing, and unemployment are all on deck this week, no news was due out Monday.  And no news is about the only good news this economy seems willing to share.

So enjoy the final hour of the only news-free trading day of the week.  Tomorrow morning at 8:30, the party's over.

Update:  Dow ends the newsless day up 0.009%.

With that win in the bank, as long as stocks can endure the looming 4-day onslaught of economic data without losing more than 1.06 points by Friday, we'll avoid extending the weekly losing stretch to 7.

Belated: FoxNews.com Live 9-10

I was on FoxNews.com Live this morning from 9-10.

Topics included the GOP horse race, the economy, and a little Weiner.

If you missed it live, the show will be available at the link until 5 pm (dial the tape back to 00:00:00).

Update:  A clip.

Jobless Thursday

Higher.

In the week ending June 4, the advance figure for seasonally adjusted initial claims was 427,000, an increase of 1,000 from the previous week's revised figure of 426,000. The 4-week moving average was 424,000, a decrease of 2,750 from the previous week's revised average of 426,750.

Just 1,000 higher than last week, but that previous reading was revised upward by 4,000.  Economists were expecting a 1,000 uptick from the unrevised number, so this is a high-side surprise of 4,000.

Perhaps growing numb to the drumbeat of bad economic news, the market shurgged off the disappointing data and (after an hour of trading) were on pace to snap their 6-day losing streak.

Oil Pops On No OPEC Agreement

Just before the opening bell, the oil cartel surprised with the announcement that they had not agreed to increase production at their latest meeting.

No one really saw it coming, based on countless stories like this earlier this morning:

Crude-oil futures fell in anticipation of a widely expected move by a group of key oil producers to raise its production ceiling at its meeting in Vienna.

On the news, oil futures spiked and stocks came out of the gate lower at the start of what would be a 7th consecutive down day.

I'm not going to bother saying to watch for the Dow to finally slip under 12k this time (but, you know, watch for it).

Markets Continue Losing Streak

No immediate end in sight for the data-driven misery on Wall Street.

Today was the fourth trading day down for the Dow in a row, which hasn’t happened since August, believe it or not.

It seems hard to believe, considering the market is on a five-week losing streak; you’d think there would have been some four-day stretches in there, but no. Maybe that’s just an indicator of how shallow this selloff has really been so far. The Dow is still down less than 6%. History suggests there might be more to come.

Indeed.

Despite the 6% decline from the April highs, we're still more than 25% above the trough set last summer, when some economic indicators were on par with or better than current levels.

Prediction: An Intriguing Photo Tweeted By Anthony Weiner To Be Released in 12 Minutes; Update: Weiner Goes Topless

Andrew Breitbart's Big Journalism has been rolling out new Twitpics of Congressman Weiner this morning, after "a woman had come forward with what she claims are intimate photographs, chats, and emails that she allegedly exchanged with Rep. Anthony Weiner (D-NY)."

The first two hit the site at 8 and 10 am (following the initial post heralding their impending unveiling at 6 am).  The first picture (seemingly documenting for the recipient the authenticity of the sender) was a little odd, the second making suggestive use of a non-Weiner double entendre.  I boldly predict that the third will be downright titillating and will appear at noon sharp.

Stay tuned!

Update:  Bold prediction fail.  12:10 and no updates.

So while we wait, let me double down with another prediction: after a few more clumsy attempts to wave off this "distraction" with pleas to respect his wife's privacy, Weiner will resign by the end of the week (without ever explicitly acknowledging that he lied about the original hack/prank).

Update:  Yikes.  And there they are.  Content warning: Weiner's shirt has come off.

Also:

On Wednesday, May 18, 2011, Rep. Weiner sent an email to the young woman from that same Yahoo! email address that included the now-infamous grey underwear photograph (attached to the email as “package.JPG”) ...

Later that same day, apparently after receiving several images from the young woman, Rep. Weiner allegedly sent another photograph to her from the same Yahoo! email address.

That photograph (attached to the email as “ready.JPG”) is extremely graphic, and leaves nothing to the imagination.

I'd say he's about done now (Weiner, not Breitbart).

Resignation watch:  Weiner will hold a press conference at 4 pm.

Allahpundit says no.

Intrade says yes.

Update:  NY1 says no.

Update:  Weiner tearfully admits sending the photos (including the original) and making up the hacker story.  Says he has no intention of resigning.

FoxNews.com Live 9-10

I'll be on FoxNews.com Live this morning from 9-10.

Topics to include Weiner, Santorum, Palin, and Romney, plus Austan Goolsbee's latest comments on the economy.

If you miss it live, the show will be available at the link until 5 pm (dial the tape back to 00:00:00).

May Employment Report; Update: Sweet Fancy Moses

It's due out at 8:30 am.  As previewed yesterday and the day before, it's gonna be ugly.

Consensus estimates of jobs added in May have dropped in recent days from 183,000 to 160,000.  That'd be down from 244,000 (268,000 private) jobs created in April.

Notwithstanding the mixed results of my previous prognostication, I'm going to say we'll see something closer to 65,000 total (90,000 private).

The market expects the unemployment rate to stand pat at 9.0%.  That's hard to pin down in a given month, even if you know the job creation figures, as frustrated workers exiting the job hunt and waves of long-term unemployed rolling off the dole tend to buffett the ratio around.  If we're adding less than 100,000 jobs a month, we're not nearly keeping up with population growth, so the real unemployment rate would clearly be rising.  But the monthly snapshot of the reported headline rate often contradicts that analysis.

Even so, let's be bold and say the rate not only ticks up, but pops - all the way to 9.3%.  There've been some large denominator effects keeping the rate down in recent months; if they're beginning to normalize, we'd expect a bit of a sudden jump, even without job creation screeching to a halt.

Stay tuned!

Update:  Slightly worse than my apocalyptic prediction:

Nonfarm payroll employment changed little (+54,000) in May, and the unemployment rate was essentially unchanged at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. Job gains continued in professional and business services, health care, and mining. Employment levels in other major private-sector industries were little changed, and local government employment continued to decline.

Private payrolls increased 83,000.

Update:  S&P futures weren't thrilled by the news.

If you weren't short equities (as these pages suggested you ought to be early this week, with this dreadful data looming), maybe you can still make some gains by shorting Obama's re-election prospects (up slightly over the last week, at 62%).

Update:  13,600 of the 54,000 new payrolls (more than 25%) were literal McJobs.  [Correction: More like half.]

Dow futures down triple digits.

Update:  Ed at Hot Air digs deeper into the hideous numbers.

Update:  Labor Secretary Hilda Solis will appear shortly to explain why these are actually good numbers...

Update:  Boom.

The eternal optimists at Barclays have finally cracked. They just cut their second-quarter GDP forecast to 2% from 3.5%. That's a big swing for this normally staid, persistent bunch.

Perhaps I say this too frequently, but look for the Dow to lose its 12-handle intraday.

Update:  Solis spins: The numbers are "a bit disappointing" but we expected a few "bumps in the road."  Businesses are to blame, for not hiring more people.  Congress is also to blame, for not "cooperating" with the administration to create consumer confidence.  "Jobs will come back eventually."  We need more public sector "investment" (citing the auto bailout as the exemplary model); let's look at infrastructure and alternative energy! [Flip: didn't we do something like that a couple years ago? $800 billion worth?]  In the last 15 months, we've created 2.1 million private sector jobs.  "I would hope we're going to be able to grow jobs" going forward.

So even when you cherry pick your lookback period like that, the best you can muster is an average job creation pace of 140,000/month.  Just barely enough to keep up with population growth, not to reduce unemployment at all.

Plus, Solis ignores the 350,000 net public sector layoffs over those 15 months.  Total payrolls only increased 1.8 million during that period.  At 120,000/month, that's less than we need just to keep up with population growth, meaning real unemployment during the administration's showcase period increased.

Jobless Thursday

T-minus 5 minutes until the weekly unemployment claims data (8:30 am).  The market is expecting a decline from 424,000 to 413,000, but given the spate of bad news (including recent employment data), that might be optimistic.

I'm going to plant a bold flag and guess last week's number will be revised upward to 428,000 and this week's will climb to 439,000.

Stay tuned!

Update:  Well, nailed it on the revision (up 4,000 to 428,000) and was directionally correct on the surprise (worse than expected), though not on the week-to-week change, which showed a mild decline.

In the week ending May 28, the advance figure for seasonally adjusted initial claims was 422,000, a decrease of 6,000 from the previous week's revised figure of 428,000. The 4-week moving average was 425,500, a decrease of 14,000 from the previous week's revised average of 439,500.

Once that 422,000 is revised (upward, inveitably) next week, this week will likely prove very close to flat*, which (while disheartening, given unemployment's stubbornly elevated level), is probably as much as we dare hope for, in light of recent economic headlines.

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* Or, quite possibly, the revised data could show an increase, not a decrease.

A Labor Department official said there was nothing unusual in the state-level data, but noted that four states and territories, including Virginia and Oklahoma, had been estimated because of the Memorial Day holiday on Monday.

He also said Missouri had indicated that floods were affecting claims in the state, but provided insufficient information to quantify the impact.

Update:  Infuriatingly inaccurate (but not atypical) analysis from the AP:

Fewer people applied for unemployment benefits last week, but applications remain stuck at a level that signals weak job growth.

No.  422,000 initial unemployment claims do not signal weak job growth; they signal job shrinkage.  The breakeven level is somewhere around 400,000.

Even if you want to fudge your own pet estimate upward a bit and go with a breakeven of 425,000, you'd have to say 422,000 signals stagnation, not weak growth (given that it would take more than 40 years at that pace, even with that overblown breakeven assumption, to lower unemployment by a single percentage point).

About That ADP Jobs Report and the Massive Market Selloff

I've been on the road all day and didn't get to weigh in on the shockingly few private sector jobs added in May, according to the ADP payroll data.

Employment in the nonfarm private business sector rose 38,000 from April to May on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from March 2011 to April 2011 was revised down slightly to 177,000 from the previously reported increase of 179,000.

The increase of 38,000 was a far cry from the 170,000 economists expected.  Given continuing public sector layoffs, Friday's official employment report could well show negative net job creation for the month.

While regular readers likely saw the big miss coming, the markets did not.  Heading into the close, all major indices are off more than 2%, with the Dow dropping nearly 300 points.

The slew of worsening economic data in recent weeks (from business activity to home sales to disposable income to unemployment claims to GDP growth to durable goods orders) have begged equity prices to come off their increasingly unfathomable levels, but until today, traders have seemed sufficiently buoyed by comparatively trivial items (LinkedIn's soaring IPO), false comforts (ascribing transiency to the weak data because of Japan), and relief over postponed calamity (the Greek bailout).

Today's sustained, broad-based cratering of the markets suggests sentiment may finally be starting to catch up with reality.

As I noted amid yesterday morning's triple helping of grim data, there's little relief in sight for a market that's decided to pay attention to economic news.  Tomorrow, we get our weekly update on unemployment claims, a look at first quarter productivity, and factory orders for April.  And Friday brings both the ISM services index (which may slip below 50, suggesting outright economic contraction in the service sector) and the government's labor report.

The market is was expecting unemployment to remain unchanged at 9.0%, but that assumes the addition of 185,000 private sector jobs in May.  If ADP is to be believed (which of course, it isn't; it frequently whiffs as a predictor of the official data, but - ominously - it only tends to whiff by a large margin when it overestimates job creation), then we may be ticking higher.

And if investors don't again become distracted from the data that unanimously attest the economic recovery has stalled for a second time, prepare to see a lot more red on the tickers.