NPR Says Investors Are Out to Lunch

It told listeners on the headline news on Morning Edition that stock prices rose yesterday due to a fall in new unemployment claims, a surge in durable goods orders, and an increase in new home sales. If these reports were really the basis of investors' optimism, then we should all be very scared since it would mean investors are really clueless.

New unemployment claims were reported at 623,000 for last week. This is down by 13,000 from the 636,000 reported for the prior week, but it is down by only 8,000 from the number that had been reported before yesterday's upward revision. It is also a number consistent with a very rapid pace of job loss. New claims were running at the rate of less than 600,000 a week in November, December, and January, when the economy was losing more than 600,000 jobs a month. (Note, the weekly claims refer to the number of people who filed for unemployment insurance in that week. The monthly job loss refers to the net change in employment [new hires minus job losers] over the course of a month.)

As noted in an earlier post, there was no surge in durable goods orders. There had been a downward revision to the March data that was equal to or larger than the extent to which the April numbers exceeded expectation. New orders for capital goods, the investment component of this measure, fell sharply in April.

Finally, new homes sales reported for April were up by 1,000 from the level reported for March, but this 4,000 below the level previously reported for March. The April sales level is the second lowest on record.

In sum, none of these reports are especially good. In each case, they could have been worse, but none provide any evidence of growth, nor even much evidence that the rate of decline is slowing. Whatever modest improvement they show from the weak reports in prior weeks/months is well within the margin of error for these reports.

As a more general proposition. No one knows what was in the mind of the millions of investors whose actions moved the market yesterday. Media outlets should attribute the claim of what was in their minds to a specific source rather than pronouncing it as a matter of fact, as NPR did this morning.

--Dean Baker