The Wall Street Journal recently reported that a bronze statue just sold at Sotheby’s auction for $104.3 million. “It must be an ancient relic,” I said. Nope – it was cast in 1960. “It must be by Leonardo da Vinci,” my colleague said. Nope – it was created by Alberto Giocometti. “The person who would spend $104.3 million on that must have a lot of other money,” another colleague said. Yes, probably.
Meanwhile, jobless claims moved higher. The four-week moving average of new jobless claims ticked up from 456,000 to 468,000. The unemployment rate is a lagging indicator of the near-term direction of the economy, but the initial jobless claims report is a leading indicator. Some fear that the economy will “double dip,” meaning, take another leg down before a sustained recovery.
Though having higher jobless claims is certainly not good, other leading indicators are pointing to the economic recovery. The Conference Board measures an index of 10 leading indicators such as yield spread (the difference between the overnight bank lending rate and the 10-year Treasury), building permits, and the stock market. The Conference Board recently reported that the index of leading indicators jumped 1.1% in December. This is on the heels of a 1% increase in November.
We take this as a good show of economic recovery (not to mention the recent report of 2009 4th quarter GDP of 5.7 %!). Joblessness is painful to those experiencing it. You can’t write off this reality because of other improving leading indicators. However, the economy has to improve before job growth can resume. In the mean time, we will save our cash and hold off on that $104 million dollar statue purchase.
Harli L. Palme, CFP®