The Numbers Behind the Headlines: A Beginner’s Guide to the Economic Releases

Every week we hear market commentators go on about a new slate of economic indicators. Unless you’ve studied economics, the torrent of information can seem like overload. The badly kept secret is that it IS overload. One indicator routinely contradicts another, and none can be considered conclusive in a vacuum. What really matters is the measurement of an indicator relative to the market’s expectation, and also the trend of a group of indicators over several observations.

It is helpful to have some perspective on the meanings and relative importance of the most commonly followed economic releases. We have listed here the major releases on which the average investor should focus. More than that, we have assigned a 1 - 3 star ratings according to the importance of each measure relative to the group (3 stars being the highest importance). Reasonable minds can, and do, disagree about which indicators are most important, but this is our take on the matter.

★★★ Top-tier  ·  ★★ Important  ·  ★ Secondary

Jobs

Employment Situation – Unemployment Rate & Nonfarm Payrolls ★★★

• Monthly, typically the first Friday.
• Net non-farm jobs added (100K – 200K is about normal)
• Unemployment rate (About 3.5% is now normal, though the standard has shifted lower over the years. There was a time when economists thought that 5% unemployment represented full employment for the US and that anything lower would be inflationary.)
• Average hourly earnings
• Really, you’re looking for the monthly and yearly change in hourly earnings, generally about 0.3% and 3.2% respectively
• Strong jobs are usually bullish, though a very hot print can stoke interest rate worries. A negative print signals recession risk. Generally, we like to see average hourly earnings growth above CPI growth, indicating increasing earning power of the worker. The employment report is widely regarded as the single most influential release where Fed decision making is concerned.

Initial Jobless Claims ★★

• Weekly, every Thursday.
• New unemployment filings.
• Under 250K is healthy. A climb toward 300K signals spreading layoffs. Falling claims are bullish, rising claims bearish, generally. The perverse logic of the bond market, however, can sometimes cause investors to root for higher claims in hopes of forestalling a Fed rate hike.
• The jobless claims report is an important piece of information, but it can be volatile week to week. It’s better to watch the 4-week moving average.

ADP Employment Report ★

• Monthly, two days before the government report.
• Since 2010, it averages about 140K monthly private sector jobs added, though that number has declined to 40K – 50K over the past two years.
• A private-sector payroll estimate treated as a preview. It moves markets less.

JOLTS Job Openings (Job Openings and Labor Turnover Survey) ★

• Monthly, about a month behind.
• Unfilled positions; 7 - 8 million is normal lately
• More openings mean a tight labor market (bullish for growth, inflationary for rates); a sharp drop signals cooling.
• This release also features the “quits” number, which measures the number of workers who left their jobs. It usually shows about 2.3%, or 3.3 – 3.5 million workers each month. A higher number reflects a tighter (worker-friendly) labor market. A lower number reflects a weaker labor market.

Inflation

Consumer Price Index (CPI) ★★★

• Monthly, usually between the 10th and 15th, covering the prior month.
• Measures how fast prices are rising for the basket of goods and services households actually buy. “Core” CPI strips out food and energy, which can throw off the month-to-month readings because they are so volatile.
• Normal is about 0.2% per month, or 2% – 3% per year. The Fed’s stated target is 2%, though this benchmark is actually deployed against core PCE (which is covered below).
• Hotter-than-expected CPI is bearish, since it keeps interest rates higher for longer. A cooler print is bullish.
• Along with the jobs report, and PCE, CPI is among the releases the Fed watches most closely.

Producer Price Index (PPI) ★★★

• Monthly, usually the day after CPI.
• The same idea one step upstream: the prices businesses receive for what they produce. Rising producer prices tend to get passed along to consumers a few months later.
• Normal is about 0.2% per month, or 2% – 3% per year, roughly tracking CPI.
• Hot is bad for stocks, cool is good. The market treats PPI as a preview of where CPI is headed.

Personal Consumption Expenditures (PCE / Core PCE) ★★★

• Monthly, near month-end, released inside the Personal Income and Spending report.
• The Fed’s preferred inflation gauge. It is broader than CPI and adjusts for consumers switching to cheaper substitutes when prices rise.
• Normal core PCE is about 0.2% per month, or about 2% per year. This is the number against which the Fed’s 2% target is actually measured.
• A hot print is bearish because it raises the odds the Fed holds or hikes. In line or cooler is bullish.
• Because CPI comes out two weeks earlier and feeds into the PCE calculation, the PCE number is usually well anticipated.

Growth and Manufacturing

Gross Domestic Product (GDP) ★★★

• Quarterly, in three estimates: the advance estimate about four weeks after the quarter ends, then a second and third revision in each of the following two months.
• The total value of everything the economy produces, reported as an annualized growth rate. It is the broadest single measure of economic health.
• Normal is 2% – 3%. Above 3% is strong; below 1% is weak; two consecutive negative quarters is the rule-of-thumb definition of a recession.
• Faster growth is bullish, and contraction is bearish.
• GDP is backward-looking, describing a quarter that ended a month or more ago, so the market often shrugs at it unless the surprise is large. The second and third estimates rarely move anything.

ISM Manufacturing PMI (Institute of Supply Management, Purchasing Managers Index) ★★

• Monthly, the first business day of the month.
• A survey of purchasing managers at factories: are new orders, production, employment, and deliveries rising or falling?
• 50 is the dividing line between expansion and contraction. Readings of 48 – 56 are typical. Below 43 usually means the whole economy is contracting, not just factories.
• A rising index is bullish; a drop below 50 is a warning. The “prices paid” subindex is also watched as an early inflation signal.

ISM Services PMI ★★

• Monthly, the third business day of the month.
• The same survey for the service sector, which is roughly 70% of the US economy.
• 50 is the dividing line. Readings of 50 – 56 are typical.
• Rising is bullish, falling is bearish. Because services are the bigger piece of the economy, a services reading below 50 is a louder alarm than a manufacturing one.

Empire State and Philadelphia Fed Manufacturing Surveys ★

• Monthly, mid-month. Empire State (New York Fed) lands around the 15th; Philadelphia Fed follows a few days later.
• Regional factory surveys that ask whether business conditions improved or worsened.
• Zero is the dividing line. Readings of –10 to +20 are common; anything beyond ±30 is an outlier.
• Positive is bullish for industrials. Both are noisy and unlikely to much move markets.

Industrial Production ★★

• Monthly, mid-month, from the Federal Reserve.
• Physical output from factories, mines, and utilities. It comes with capacity utilization, which shows how much of the nation’s productive capacity is actually in use.
• Normal production growth is 0.1% – 0.3% per month. Normal capacity utilization is 76% – 80%; above 80% historically signals inflation pressure.
• Gains are bullish for industrial and cyclical stocks. Declines suggest manufacturing is slowing.

Durable Goods Orders ★★

• Monthly, in the fourth week of the month.
• New orders for long-lasting products such as machinery, appliances, and aircraft. A rough proxy for business investment.
• The headline swings wildly, ±3% or more, because a single Boeing order can distort it. Watch “ex-transportation,” where 0.2% – 0.5% per month is normal.
• Rising orders mean businesses are confident enough to invest. Falling orders mean they are pulling back.

Factory Orders ★

• Monthly, about five weeks after the month ends.
• The broader version of durable goods, adding orders for nondurable goods like food, chemicals, and paper.
• Normal is 0% – 0.5% per month.
• Rising is bullish for industrials. Since the durable half is already known, the surprise is usually small.

Construction Spending ★

• Monthly, the first business day of the month.
• Total dollars spent on residential, commercial, and public construction.
• Normal is 0% – 0.5% per month.
• Positive readings are bullish for builders and materials companies. A string of negative prints hints at a slowing economy.

Business and Wholesale Inventories ★

• Monthly. Wholesale inventories arrive around the 10th. The broader business inventories report follows mid-month.
• Unsold stock sitting on company shelves, along with the inventory-to-sales ratio.
• Normal inventory growth is 0.2% – 0.4% per month. A normal inventory-to-sales ratio is about 1.35 – 1.40 months of supply.
• Modest growth is fine. A big inventory build alongside weak sales means production cuts are coming, which is bearish. Inventories also feed directly into the GDP calculation.

Leading Economic Index (LEI) ★

• Monthly, in the third week of the month, from the Conference Board.
• Ten forward-looking measures (jobless claims, building permits, stock prices, the yield curve, and so on) combined to forecast the economy six months out.
• Normal is a change of ±0.3% per month.
• Rising is bullish. Six or more consecutive monthly declines has historically preceded a recession, though the signal is not entirely reliable.

The Consumer

Retail Sales ★★

• Monthly, mid-month, covering the prior month.
• Consumer spending at stores, restaurants, gas stations, and online. Consumer spending is roughly two-thirds of GDP, so this is the most direct read on the consumer.
• Normal is 0.2% – 0.5% per month. Watch the “control group” (excluding autos, gas, building materials, and food service), which feeds GDP.
• Strong sales are bullish, especially for retailers and consumer discretionary stocks. A negative print is a warning that the consumer is tapped out.

Personal Income and Spending ★★

• Monthly, near month-end, in the same report as PCE inflation.
• How much households earned and how much they spent, plus the personal saving rate.
• Normal is 0.3% – 0.5% per month for both income and spending. A normal saving rate is 4% – 6%.
• Spending outrunning income means consumers are dipping into savings, which supports the economy now but is not sustainable. Income rising faster than spending is the healthier pattern.

University of Michigan Consumer Sentiment ★

• Twice monthly: a preliminary reading on the second Friday and a final reading on the fourth Friday.
• A survey of how consumers feel about their own finances and the economy, plus their expectations for inflation.
• Normal is 70 – 100. Today’s low-50s readings are historically depressed. Normal one-year inflation expectations are about 3%.
• An improving mood is bullish for consumer stocks. The inflation-expectations piece is what the Fed reads.
• Sentiment surveys measure how people feel, not what they do. Consumers have been reporting record gloom while continuing to spend, so treat these as a supporting indicator rather than a driver.

Conference Board Consumer Confidence ★

• Monthly, the last Tuesday of the month.
• A second consumer survey, weighted more toward the job market than the Michigan survey.
• Normal is 90 – 110 on a scale where 1985 equals 100. Below 80 has usually meant recession is near.
• Rising is bullish. The “jobs plentiful” versus “jobs hard to get” spread is a useful early read on the labor market.

Consumer Credit ★

• Monthly, around the fifth business day, but covering a month that ended five weeks earlier.
• New borrowing on credit cards, auto loans, and student loans, excluding mortgages.
• Normal is $10 – $20 billion of new credit per month.
• Rising credit supports spending, but it signals stretched household budgets when incomes are not keeping up. A sharp drop means consumers are pulling back.

Housing

Housing Starts and Building Permits ★★

• Monthly, around the 17th – 19th of the month.
• Starts count new homes where construction began; permits count homes approved to be built. Permits lead starts by a month or two.
• Normal is 1.3 – 1.5 million annualized for both. Below 1.0 million has been recession territory.
• Rising is bullish for homebuilders, materials, and furnishings. Housing is the most interest-rate-sensitive part of the economy, so strength here also tells you that rates are not choking growth.

New Home Sales ★★

• Monthly, in the fourth week of the month, from the Census Bureau.
• Sales of newly built homes, recorded when the contract is signed.
• Normal is 600K – 700K annualized.
• Rising is bullish for builders. The monthly numbers are heavily revised, so watch the three-month trend rather than any single print.

Existing Home Sales ★★

• Monthly, in the third week of the month, from the National Association of Realtors.
• Sales of previously owned homes, recorded at closing. Roughly 90% of all home sales.
• Normal is 4 – 5 million annualized in the current high-rate environment; 5 – 6 million in a healthy market historically. Months of supply of 4 – 6 is balanced.
• Rising sales are bullish for the broader economy (furniture, appliances, brokers, mortgage lenders). Falling sales with rising inventory points to softening prices.

NAHB Housing Market Index ★

• Monthly, mid-month, a day or two before Housing Starts.
• A survey of homebuilders on current sales, expected sales, and buyer traffic.
• 50 divides optimism from pessimism. Readings of 40 – 70 are typical.
• Rising is bullish for builders and a leading signal for starts. Builders see demand before it shows up in the sales data.

The Fed and Government

FOMC Minutes ★★

• Eight times a year, three weeks after each Fed meeting.
• The written record of the Fed’s policy discussion: who argued for what, and how united the committee is.
• There is no numeric range. The market reads the tone and counts the number of participants who lean one way or the other.
• “Hawkish” (leaning toward higher rates or fewer cuts) is bearish. “Dovish” (leaning toward lower rates) is bullish.
• The minutes are three weeks stale by the time they arrive, so they rarely change the story. They matter most when the market is unsure how close the Fed is to a move.

Fed Beige Book ★

• Eight times a year, two weeks before each Fed meeting.
• A plain-English report on economic conditions in each of the twelve Fed districts, compiled from business contacts.
• No numeric range. Read the frequency of words like “modest,” “moderate,” “softening,” and “strong.”
• It seldom moves the market, but it previews the conditions the Fed will discuss at its next meeting.

Jackson Hole Symposium ★★

• Annually, in late August.
• The Kansas City Fed’s policy conference where the Fed chair typically delivers a keynote that has often been used to signal a shift in direction.
• No numeric range. The market parses the chair’s speech word by word.
• A dovish speech is bullish; a hawkish one is bearish. Several of the largest single-day moves of the past decade came out of this speech.

Treasury Budget Statement ★

• Monthly, around the eighth business day of the month.
• The federal government’s monthly deficit or surplus: tax receipts minus spending.
• Deficits are chronic. Monthly readings swing between roughly –$100 billion and –$300 billion, with April usually the one surplus month thanks to tax season. The annual deficit has been running about 6% of GDP.
• A widening deficit means more Treasury borrowing, which lifts bond yields and pressures stock valuations. A narrowing deficit is mildly bullish. This release does not generally have much impact on the stock market.