July 17, 2009

U.S. July 2009 ERRI at 11.27

Posted in economic indicator, economic recovery, mortgage reform, Obama administration, U.S. Economy tagged , , , at 6:19 am by realitytax

Using a proprietary “realitytax” calculation that incorporates stock market valuations drawn from 10 major sectors central to economic recovery in the U.S. (as detailed in the ERRI equity table below) and wage and employment data released by the Bureau of Labor Statistics, the Economic Recovery Reality Index [ERRI] value is calculated as 11.27 for July 2009. The August ERRI will be released following the BLS assessment, scheduled for August 7.

The index reacts somewhat sluggishly to changes in the stock markets; it is considerably more sensitive to the employment data.  For the sake of comparison had the ERRI been calculated and published at various times  during the summer of 2008 prior to the ripple effects of the credit/mortgage crisis, etc., values would have been roughly 6 to 10 times greater. While generally the absolute number is less relevant than the trend, single-digit values correlate strongly with recession.

The number of unemployed persons (14.7 million) and the 9.5% unemployment
rate, and the 65.7% civilian labor force participation rate in the U.S. were little changed in June. The employment/population ratio, at 59.5%, trended down during the same month, with roughly 30% of the unemployed having been out of work for half a year or longer.

The figures in the columns “shares” and “values” in the table below are included to further illuminate the weighting of the entirely hypothetical equity component of the new ERRI formula. Neither this formula nor the “fund” should be construed as investment advice or an endorsement of any particular equity, sector, or strategy. I am a student of the economy trying to figure out if/when the recovery is underway, not a broker, trader, economist, banker, investment adviser, or even a mathematician.

The sectors and specific stock choices, explained in greater detail by following links from each symbol, are a complex balance intended to measure broadly the market activity in areas reflective of key domestic sectors and global inter-dependencies while carefully excluding certain traditional index components (such as the big three U.S. automakers) that are reacting to such unusual conditions that they might distort the calculation. As such, they are included because they are expected to track various sectors, not out-perform the broader U.S. equity markets. They are included publicly for the sake of veracity, transparency, and verification only.

symbol 07/15
shares value Sector Industry
EMN $ 36.85 27 994.95 Basic Materials Chemicals – Plastic & Rubber
HON $ 31.18 16 498.88 Capital Goods Aerospace & Defense
CAT $ 31.93 15 478.95 Capital Goods Constr. & Agric Machinery
FDML $ 9.67 103 996.01 Consumer Cyclical Auto & Truck Parts
HQS $ 8.37 119 996.03 Consumer NonCyclical Fish / Livestock
BBEP $ 7.32 68 497.76 Energy Oil & Gas (Integrated)
PZE $ 5.98 83 496.34 Energy Oil & Gas (Integrated)
AIB $ 4.58 72 329.76 Financial Money Center Banking
CMA $ 21.84 15 327.60 Financial Regional Bank
FITB $ 7.06 47 331.82 Financial Regional Bank
CCI $ 24.26 20 485.20 Services Communications Srvcs
JWN $ 20.11 24 482.64 Services Retail (Apparel)
FSLR $141.54 7 990.78 Solar Technology Semiconductors
RIMM $ 66.18 7 463.26 Technology Comm. Equipment
PLXS $ 21.59 23 496.57 Technology Electronic Instr & Controls
POM $ 13.54 73 988.42 Utilities Electric

1 Comment »

  1. ERRI said,

    Reality Index (ERRI) 1.62 points lower, cutting the August gains to a modest 3.13 points over July 2009 to 14.41 as for September, 2009. In August, the number of unemployed persons increased by 466,000 but the other signs are starting to show renewed health, and while job recovery always lags we may have seen the real start of a turnaround.

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