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Investing Specialists

Was the June Quarter GDP a Fluke?

The June trade deficit sank the last GDP report, but it may reverse itself.

The economic calendar this week was extremely thin. The trade deficit for July came in far better than anticipated, possibly positively affecting GDP forecasts for 2010. Since it was such a slow news week, I spent a lot of time explaining how this arcane indicator sank the June GDP report and why it may reverse itself in the September quarter.

Initial unemployment claims fell dramatically this week, but these numbers have been volatile lately. Initial unemployment claims processing around holidays is always a bit suspect; I wouldn't be shocked to see the improvement reverse itself next week. Both the trade report and the claims numbers are a further reminder of the dangers of relying on just one month's worth of government data.

In other positive news, the Challenger Gray & Christmas report on announced corporate layoffs fell to its lowest level in a decade, and the number of announced layoffs has fallen by more than two thirds from its peak. The drop-off substantiates a government report of several weeks ago showing a sizable decline in mass layoffs (those involving more than 50 people). Apparently, small tuck-in layoffs and layoffs by small businesses are holding back the initial claims numbers, which are still running much higher than I would like to see.