Cue The Panic

The Philadelphia Fed composite Business Activity index, expected to come in at +7, instead came in at -7.7 . The subindex for Number of Employees was the lowest since late last year; the Workweek index was the lowest since last summer. There is not much ambiguity here when you combine this with the Claims number. It isn’t looking great .



Now, note that the Philly Fed index is pretty volatile. So this is a good time to think in terms of rejectable hypotheses. Last month, I would have said the dip is concerning, but at the limit of what might be acceptable volatility for an economy still expanding. This dip, however, is sufficiently large that I believe we can dismiss the hypothesis that the economy is still growing as strongly as it was in Q1 and Q2 (when the government was stimulating the economy, that is). At -7.7, given the volatility of the series, we can’t be sure the economy is actually contracting, but at least in the Philadelphia region it is probably pretty close to zero.

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