Are home prices up and unemployment claims down?

If you just scan the headlines, you might easily get the impression that home prices are really going up and unemployment claims are really down.

The Case-Shiller index

Take a look at this headline form USA Today proclaiming loudly Home prices rose in July in 20 major cities:

It is interesting that there is no chart to go with the story. After all, the press release from S&P actually does include a chart that shows the entire series.

However, the very same press release opens with an absurdly incorrect statement (I would call it a lie, but I am not sure why anyone would do something like this on purpose, so I will refrain from accusing them of lying):

New York, September 25, 2012 – Data through July 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed average home prices increased by 1.5% for the 10-City Composite and by 1.6% for the 20-City Composite in July versus June 2012.

You can only make month-to-month comparisons using seasonally-adjusted data.

The value of the seasonally adjusted 20-City Composite in July 2012 is 142.1. In June 2012, it was 141.48.

It doesn't take more than five Chicago public school teachers to figure out that the increase was 0.44%, not 1.6% as the press release claims. The change in the 10-City composite was 0.42%, not 1.5% as the press release claims.

That aside, the following simple graph should convince you that the real headline ought to have been Home Prices Still Stagnant.

After all, the July 2010 value for the index was 146.56 meaning the July 2012 value is actually 3% lower than it was during the First Recovery Summer (remember those?)

The interpretation of this chart is straightforward: While there is some up-and-down movement, the index has essentially been flat since it bottomed in May 2009. Keep in mind that the weather was mostly decent this summer. The future is yet to be written, and the housing market may go through an impressive recovery, but there is no evidence of that in this chart.

Initial unemployment claims

This is another statistic where inappropriate comparisons and lack of context give rise to clouds of misleading headlines every Thursday. For example, here is this gem from the Christian Science Monitor which proclaims Unemployment claims decline by 3,000.

This is a maddening article. It is accompanied with a chart that is almost impossible to comprehend.

In fact, this particular headline finally motivated me to write a program to download and parse all the unemployment claims press releases since 2006.

The problem is simple: Every week, the Department of Labor publishes their first guess at how many people filed initial unemployment claims during the previous week. They also publish a corrected/revised version of the number they published the week before.

They then compare the first guess for the past week with the corrected number for the prior week. This is blatantly wrong. One must compare first guesses with first guesses and revised numbers with revised numbers.

So-called journalists then parrot these incorrect comparisons. It turns out, the number is rarely revised downward. If you look at the press release for week ending September 15, it says:

In the week ending September 15, the advance figure for seasonally adjusted initial claims was 382,000, a decrease of 3,000 from the previous week's revised figure of 385,000.

But, the previous week's first guess was 382,000, meaning, in fact, it is not appropriate to claim any kind of change. Two days from now, we will get a new press release which will provide the revised number for the week ending September 15. Only then are we going to be able to say if initial unemployment claims actually went down between September 8th and September 15th (my guess is they didn't—In fact, I expect them to have gone up, but that's beside the point).

So, here is a chart which shows both the advance and the revised numbers since Memorial Day this year:

There is no recent downward movement, and, in fact, one could say we seem to be headed towards the 400,000 initial claims level.

Here is the complete picture of unemployment claims since 2006:

The crisis is over, but we are stuck in the doldrums in a range of weekly unemployment claims that is higher than the levels before the crisis.

Conclusion

We are only going to get one more update on the Case-Shiller index before the election and that will pertain to August 2012 which also might show a tiny but positive change which the so-called journalists will spin as signs of a housing market recovery. Every movement in every other economic indicator will also be twisted, rotated, and stretched to try to create the impression of a slow and steady recovery.

At the same time, the fact that the DJIA is almost back up to the 2007 levels will be touted as a great success. However, I am not sure why we should applaud the stock market performance created by a government and central bank giving various financial players free money (did they tell the kids at various Occupy camps they were doing this?)

You will know when the real recovery comes. No one is going to have to engage in chartmanship to prove that things are hunky dory.