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The 7 Critical Economic Indicators You Need To Check Every Morning

Everyone has a different opinion on how best to take the measure of the markets and the economy at large.

Hairs standing up on end, a knee that aches with the weather, tea leaves, earnings estimates, the Hindenburg Omen – it seems like all of these are significant in some way at one time or another.

Here at Money Morning, it's no different. We have an editorial meeting each and every morning – rain or shine – where the editors and writers huddle to pitch the stories and reporting we bring you every day. The meeting covers a huge range of financial and policy topics, and ideas of all stripes are kicked around and discussed until a solid story emerges.

A few days ago, we talked about important financial and economic indicators, where each of us turn to get some idea of the health of the markets and economy. Someone asked, "What's the number you look at first ever day?" We all answered in turn, and a really interesting collection of ideas began to emerge – as it always does.

Here are the numbers we think you should be looking at every day – before breakfast, after coffee – if you want to get an idea of the big picture.

  • U6 or, the "real" unemployment rate: The U. S. Bureau of Labor Statistics keeps all sorts of unemployment data. Although all the data is freely available to those who look, only one figure is hyped. When "unemployment" is discussed in the media or by the White House, the number usually refers to U3. U3 is a rather vanilla figure, and it refers to people who have been unemployed for 15 weeks or more, and still collecting unemployment benefits.

    U6, however, is the gut-puncher. It accounts for just about everything: people who have long since lost their benefits, who work only occasionally if at all, and those who are labeled "disaffected workers." It's the U6 number where you'll find the real picture. It's currently stands at a very sobering 13.9%. Contrast this with the "official" U3 rate of 7.5%

  • The American Institute for Economic Research "Everyday Price Index": Does it ever seem weird to you that you keep hearing about how low inflation is? There's a good reason for that. It's not true. The current "official" inflation rate was reported as 1.06% in April. Dry that figure out, and you can have the greenest lawn in the neighborhood.

    The Everyday Price Index tracks higher than that. A lot higher. The reason. EPI is not seasonally adjusted. After all,are you? This means it tracks much more closely with the way prices really feel to consumers, how big of a hit your wallet is really taking. The EPI usually runs between 1 % to 3% higher than the Consumer Price Index, although sometimes they do run in tandem in certain categories.

  • The Baltic Dry Index: The Baltic Dry gives a good at-a-glance idea of the health and volume of global growth. It directly measures the demand for shipping capacity against the supply. Despite its moniker, it's not from the Baltics, rather from the Baltic Exchange in London. It measures the price of moving most major raw materials like coal, iron ore, and grain by sea.

    It factors in 23 shipping routes on a time-charter basis. These 23 routes are said to be representative of the entire dry shipping market. The Baltic Dry index hit a stupendous 11,793 points in 2008, and then crashed – along with just about everything else – to 663 points later the same year. It has since recovered somewhat, and sits at 806. This obscure little index is your ticket to understanding the global growth picture in three or four digits.

  • The Chicago Board Options Exchange Market Volatility Index: Called the Fear Index, it gives you a picture of volatility on the S&P 500 options market. It's a measure of the expected volatility over the next 30 days, annualized. The lower the VIX number, the lower the expected volatility on the S&P 500.

    There is a famous VIX derivative, an exchange traded note traded (VXX). VXX is the hedge of smart cookies the world over. The more volatility on the markets, or the more likely the S&P is to take a dive, the more valuable VXX will be. The VIX is a great gauge of market sentiment and predictability.

  • Corn Futures (CBOT): Corn futures are traded on the hallowed old Chicago Mercantile Exchange. Simply put, corn is the world's most important grain. These humble kernels feed millions, are used in a myriad of industrial applications, and form the basis for huge markets worldwide. The importance of tracking corn futures prices cannot be overstated.
  • The U.S. Dollar Index (USDX): This tracks the performance of the dollar relative to a basket of major currencies. The currencies and their "weights," or statistical importance to the index, are as follows:

    Euro: 56.7%
    Japanese yen: 13.6%
    Pound sterling: 11.9%
    Canadian dollar: 9.1%
    Swedish krona: 4.2%
    Swiss franc: 3.6%

    The USDX goes up when the dollar is stronger relative to the other currencies, and down on dollar weakness. It's a good way to get your head around the import/export picture, and obviously foreign exchange.

  • 10-year U.S. Treasury yields: The bond yield curve can be insanely complicated to figure out. But don't worry. If you only focus on the importance of 10-year Treasury note yields, you'll know what you need to know. The 10-year yield gives you insight into the prevailing market mood, the risk picture and the health of the economy at large.

If the economy heats up the 10-year yield should rise with the growth. Conversely If the economy slows down, the yield would likely fall. A caveat: the Fed's easy money policies have mucked up this indicator a bit, but the recent upward spike in the 10-year might be telling us the economy is slightly improving.

If you have anything you'd like to add, we'd love to hear from you. What #economicindicators concern you the most? Sound off on our Twitter page, or drop us a line on Facebook.

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  1. Lorne DeWitt | June 10, 2013

    Thanks, I've been wondering what to do, as when Lehmann Bros. went under I lost my crystal ball. I used to refer to their "Lehmann Brothers' Aggregate Bond Index." It was a collection of numbers covering a projected ten year period that I would translate into percentages of growth or decline year over year. I'd then factor in the "Law of 72" to adjust for inflation and viola; It provided me an accurate formula that helped me to predict how the overall economy would perform. I'd then know when to place money into, or pull out of the stock markets.

    It was so accurate, that when the 2000 report was released and I did my calculations, I knew that fiscal year 2008 was when the U.S. would enter it's 2nd Great Depression. I warned all my family and friends and proceeded to prepare myself for the coming crises. I didn't know the specific date and when asked I'd simply say, "Well, the fiscal year begins Oct. 1st, so it's probably best if you get things done on or before then."

    Boy, that was right about the time everything exploded! Thanks to that now extinct index I've made a bundle, but have been flying relatively blind since. I've managed to do well through experience and keeping up with the markets but it's still rather cryptic after having relied so heavily on such a trusty index for so long! Oh how I miss those bygone days of old…

    • Scott | March 9, 2014


      Why not use the Barclay's Aggregate Bond Index, its considered the successor to the Lehman Index

  2. Sarah | June 26, 2013

    Thanks so much for including the Everyday Price Index on the list, Greg! We really appreciate it.

    A little more on how we build the EPI: The EPI differs from the Consumer Price Index in a few ways. First, as you mention, it's not seasonally adjusted. That's so the index will reflect the prices Americans actually pay out of pocket every month.

    Second, the EPI draws from CPI data, but includes only items and services that Americans typically purchase at least once a month. It does not include contractually fixed items like mortgages.

    Third, our staff economists weight each category in the EPI in proportion to its share of Americans' average monthly expenditures.

    Thanks again for including AIER! We'll be looking forward to following your work.

  3. Ab | August 7, 2013

    Not sure why I would use a dollar index from what appers to be a Pakistan Company.

  4. Ayoola Rasaq Akanni | December 29, 2013

    How much can i earn ?

  5. Dan Iezzi | June 1, 2014

    Thanks. Who is going to buy all this stuff such as houses, etc.? There are a lot of people whose credit is ruined. Also, I recently paid off my car. Are new cars being purchased primarily by people rolling over their debt into the next car purchase?

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