Greenberg: Wal-Mart Stock as an Economic Predictor
Will emergency unemployment claims expire November 30 as expected? How about an extension on claims for those whose benefits have already expired?
If the Magic 8-Ball doesn’t know the answer, Wal-Mart's stock might.
Or so says Dan Wantrobski, director of technical research for Janney Montgomery Scott.
He’s been tracking the correlation for good reason: “Folks that are on these rolls it could be argued are typically the main Wal-Mart shopper,” he says.
“So if we believe Wal-Mart’s stock price is a leading indicator—if that stock continues to move higher—we may see meaningful changes in these emergency benefit rolls, or perhaps the broader employment picture in the U.S.”
Digging deeper: Emergency benefit claims have tracked Wal-Mart’s stock fairly closely over the last two years, but recently started to drift apart as claims fell and Wal-Mart’s stock rose.
“This emergency benefits data is reported on a monthly lag,” Wantrobski says. “That suggests the recent strength in Wal-Mart’s stock may indicate either more emergency benefits will be claimed in the months ahead as the program gets renewed or perhaps broader employment numbers are finally improving.”
Extended benefits claims, meanwhile, are part of a newer program that looks ahead three months. Here, claims numbers shot up to meet Wal-Mart's stock.
Which gets us to today: Weekly jobless claims showed a rise in both, to which Wantrobski says: “It’s telling us that Wal-Mart’s stock continues to be a leading indicator of this data point —and that we are going continue to see people file these types of claims. I would also argue it’s probably going to suggest that this program would be extended after November 30."
If not, he suggests the stock of Wal-Mart and other dollar retailers could tumble. “The loss of those transfer payments essentially drains liquidity from the retail sector if overall employment doesn’t improve.”
My take: The clock on this trade is definitely clicking.
Questions? Comments? Write to HerbOnTheStreet@CNBC.com
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