economics

5 economic indicators to watch

Economists focus on two CPI numbers. One is the overall CPI and the other is the core CPI, which is the overall number minus vital products such as oil and food products, which are excluded because of their price volatility.

"The Consumer Price Index is basically an attempt to measure consumer prices. It is a fixed basket of goods and, at least on a conceptual level, they go and measure the price of those goods and see how it changes," Hoyt says.

The CPI is used as a measure of inflation.

"If you're getting only a 5 percent increase in your pay in a year and because of inflation the prices of the goods that you buy went up 5 percent, you're really not making any more money," says Baumohl.

"Your purchasing power hasn't changed at all," he says.

New-home sales

The new-residential-sales report is released three or four weeks following the month surveyed.

New home sales have a bigger impact on GDP than do existing home sales, even though sales of new homes make up only 15 percent of the entire housing industry -- even less than that for 2008. New home sales accounted for less than 10 percent of all sales last year, according to data from the National Association of Realtors' existing home sales report and the new residential sales report released by the U.S. Census Bureau.

"There is a lot more spending (by business) that goes on ... when you construct a new home rather than selling an existing home, where you simply switch titles. We get much more of a bang for the buck," Baumohl says.

"The new-housing market makes up about 5 percent of the GDP. That doesn't sound like much, but we're talking about all of the components that go into building a home: copper, wood, gravel (and) workers, all that together makes up 5 percent," he says.

When you consider all the buying that people do before they move into their new homes -- furniture, appliances and electronics, for instance -- all of that spending activity increases the new-home market to about 25 percent of the GDP according to author Baumohl.

Employment situation

A big daddy of economic reports is the employment report. It is released on the first Friday of the month following the month surveyed.

The employment report actually comprises a couple of different surveys. One is the household survey in which households are called and asked questions about their employment status.

"They ask them whether or not they are employed or whether or not they are in the work force. That means: Do they have a job or are they looking? (Are they) a student or someone who is retired -- or are they someone who has just given up looking for a job?" Hoyt says.

"From that data you derive the unemployment rate," he says.

The unemployment rate doesn't always tell the whole picture. Not included in the headline number are those unemployed workers who have given up trying to find a job and those who are working part time because they can't find a full-time position.

The other component is the establishment survey which asks businesses how many people are on their payrolls.

Though the household survey provides the headline-grabbing unemployment rate, investors and economists look toward the establishment survey to get a more comprehensive view of the economy and industry.

"The headline that economists focus on the most is the overall nonfarm payroll. It's derived from the establishment survey," says Rick MacDonald, director of investment research and analysis at Action Economics.

"Every month, the Bureau of Labor Statistics gets a report from employers and they actually say how many people were added or subtracted from their payroll," he says.

The number can be broken down from the total to various industries.

Beyond the sound-bite-ready headline number and nonfarm payrolls statistic, there are pages and pages of numbers. According to Baumohl, the real value lies in these data.

For instance, temporary employment agency statistics are buried within the employment report.

"They will turn up almost instantly once the economy recovers, long before anyone knows if the economy is recovering or not. Usually it is the temporary employment agencies that start to see an immediate increase in hiring," Baumohl says.

For anyone with an interest in the economy or investing, getting to know some of the economic reports can be illuminating.

"Frankly if you are an investor and you make the effort, chances (are) you will make the right decision more than 50 percent of the time," says Baumohl. "And if you make the right choices more than 50 percent of the time, then you're doing it correctly."

Track a few key economic reports on Bankrate.com.

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