As the economy has gone through its many changes, I have continued to watch certain trends. One of the trends is new jobless claims each week. The number for the week is good to know, and we’d like to see it below 350,000, but the four-week average is the important number. We want to see that drop below 350,000. Last Friday, the Labor Department announced the jobless weekly number at 335,000 and the four-week number at 336,000. This was good news.
This information is available to everyone, so it is important to have some personal indexes that are not controlled by the government or media. The BK index is used to get some sense of the impact of inflation on the economy. You will recall that back on September 23, 2010, I discussed the BK index and the alarming 27% jump in the index, while the CPI only went up 3%. Since that time, the index has gone from 1.59 to 1.65, an increase of approximately 3.8% over almost three years. This would indicate that inflation is not rearing its ugly head in the consumer marketplace. (For those of you who have forgotten, this index measures the price of a Junior Whopper with cheese at Burger King over time).
Another index that I use to determine the direction of the economy is the FMAS Index. This index has been pretty reliable at determining the direction of the economy. It is also known as a leading indicator because it tends to decrease before consumer spending as a whole goes down, and tends to rise as consumers begin to spend again. I have been using this index since I realized the income of my wife, Fran Mallon (FM), an artist, and the number of Art Sales (AS), tend to move ahead of the economy. Thus I am pleased to announce that for the first quarter of this year the FMAS Index is up 400%, indicating that the economy is about to become robust!
Another very important index is the EROORES Index (Ed’s random observation of real estate sales). While this index turns out to be hard to quantify, casual observation of my own neighborhood revealed that three houses went on the market during a three-week period, and all were under contract in less than a week. Many of my clients in Denver have noted that housing sales are going like “hot cakes”, and with the help of their observations, I have gathered that the housing market is totally robust. Yes, the economy appears to be headed in the right direction, however slowly that may be.
Ed Mallon
