During a recession there are a lot of numbers thrown around, but what do those economic statistics really mean? The recession has made average citizens more aware of the data that's supposed to explain or predict the financial health of the country, so it's important to know where the numbers come from and how to evaluate them. Below are some of the most quoted statistics, how they are calculated and who they impact most. (For more info on what to do during a recession, read 4 Ways To Weather An Economic Storm.)

Unemployment Rate

  • Importance: The unemployment rate measures the financial health of the local, state and national economy. As the recession has shown, high unemployment leads to losses in tax revenue, higher foreclosure rates and overall loss of purchasing power for communities.

  • Source: The Department of Labor calculates and reports the unemployment rate monthly through the Bureau of Labor & Statistics. Get monthly updates directly from the "Economic Releases" section of the BLS website.

  • Calculation: The unemployment rate is based on a monthly survey of 110,000 households representing the entire United States. Results are weighted based on age, sex, race, geographic location, etc. The employment categories are:
    1. Employed - earning a salary or wage, unpaid workers (volunteers, interns)
    2. Unemployed - jobless, age 16 or older , available to work & looking for work
    3. Not in Workforce - under age 16, confined to an institution (hospital, prison, etc.), active in the military, retired, attending school, anyone else who hasn't looked for work in the last 4 weeks.

  • Relevance: The unemployment rate is a lagging indicator, meaning it reflects changes in the economy that have already happened. Use the data to make decisions about changing jobs, starting or expanding a business, or moving to a new state. (For further reading, check out What You Need To Know About The Employment Report.)

  • Impact: Monster Worldwide (NYSE:MWW)
    Monster Worldwide, operator of Monster.com feels the brunt of unemployment fluctuations. The company pioneered the digital career portal linking employers with prospective job candidates all over the world. It now shares the market with an ever increasing crowd of competitors. During a recession, recruiters are inundated with unsolicited resumes and decrease advertising for the few openings they have. Also, employers have started using alternate digital resources like Twitter and Facebook to broadcast vacancies. Monster still has a solid business model with search features for jobseekers. Third-quarter revenue was down 35% to $215 million. Earnings per share came in at one cent per diluted share. The stock's recent price around $14.68 reflects the cyclical nature of the business. The price-to-earnings hovers around 34.8 compared to an industry average of 28.2.

    Apollo Group, Inc. (NASDAQ:APOL)
    What do unemployed people do when they can't find a job? They go back to school. Apollo Group, Inc. is a for-profit education company. Their flagship PhoenixUniversity caters to working adults and offers degrees in growth industries such as healthcare and technology, with campus and online curriculums. The company reported a 23% growth in enrollment for the third quarter of 2009 (fiscal year ended August 31, 2009). Apollo reported profits of $201 million. With a recent price of $54.21, the stock's current price-to-earnings ratio is 15. A recent stock buyback of 4.5% of outstanding shares leaves the company with 154 million outstanding shares and earnings per share of $3.74.

Unemployment Insurance Claims

  • Importance: Businesses pay unemployment insurance, as a percentage of employee wages, to the state. Employees who become unemployed by no fault of their own - they are laid off - must file a claim to receive income from the Department of Labor for up to 26 weeks in most states (Congress has extended the length of unemployment payments for 2009). The number of new claims indicates whether or not companies are laying off workers. When companies feel confident that demand for their products or services are high, they retain or hire workers.

  • Source: The Department of Labor collects weekly unemployment insurance claim information from offices in each state.

  • Calculation: States report the number of persons filing for unemployment insurance benefits. Initial claims are those requesting payments for the first time. The Department of Labor tracks industries, geographic locations, ethnicities, ages, etc. of workers applying for compensation.

  • Relevance: The trend for new unemployment claims is often more relevant than just one month's worth of numbers. As the recession carries on, the number of unemployment insurance claims coming to an end is important. Unemployed people who were able to pay monthly bills with the help of unemployment benefits, may suddenly not be able to afford those bills anymore, impacting the overall economy. (Learn more in our tutorial on Economic Indicators.)

  • Impact: Duke Realty (NYSE:DRE)
    When companies downsize, they need less space. Real estate investment trust (REIT) Duke Realty makes money from financing, developing, leasing and managing corporate and industrial real estate. Duke handles 135 million square feet of space in 20 states. The company reported a third quarter net loss of $1.44 per share and declared a quarterly dividend of 17 cents per share. Duke is making aggressive moves, including: the resignation of the COO; selling some of its undeveloped land; focusing on lucrative healthcare properties; and raising capital to pay down debt and improve liquidity. The recent stock price of $10.93 is an opportunity for investors to pick up future income as Duke prepares for recovery.

    Organizations that lay off workers often use technology and outsourced services to gain productivity while decreasing expenses. IBM provides software, hardware, outsourcing and business consulting. The company reported third-quarter net earnings of $3.2 billion, a 14% increase over 2008. Earnings per share of $2.40 increased 18% over last year. The performance of the international company's various segments were mixed as customers realigned IT budgets. Even though revenue in some divisions decreased, profits were up because IBM accomplished what it counsels its customers to do - decrease expenses and increase productivity. The recent price of $127.03 is inching toward the predicted $140 target. The price-to-earnings ratio is 13, while the industry average is 14.2.

U.S. National Debt

  • Importance: The government borrows money from the U.S. public and from foreign organizations. The total is considered the national debt. This number is often confused with the national budget deficit, which is the difference between the revenue the government brings in and the amount of budget items for a given year. When there is a budget deficit, the government must borrow additional funds to make up the difference. Borrowed funds are not free, interest is paid on the amount due and the principal must eventually be paid back. (For more, read What Fuels The National Debt?)

  • Source: The U.S. Treasury Department tracks the total amount of funds borrowed. The total amount of current and past debt can be viewed at the treasury direct website: http://www.treasurydirect.gov/. A monthly report from of budget line items is available at http://www.fms.treas.gov/.

  • Calculation: Congress sets the maximum amount of money the U.S. government can borrow. The current amount set in February, 2009 is $12.104 trillion. The Bureau of Public Debt accounts for and reports the amount borrowed and paid back. The Financial Management Service keeps track of budget line items and deficits.

  • Relevance: Just like personal debt, national debt payments limit the purchasing power of the government, and citizens foot the bill. View local, state and national budget reports along with revenue sources to hold elected officials accountable for the amount of debt incurred.

  • Impact: Northrop Grumman (NYSE:NOC)
    Debates about the national debt often include a discussion of defense spending. Defense contractor Northrop Grumman relies heavily on the federal budget decisions because they build everything from lunar modules to aircraft carriers for the government. The company specializes in complex projects including information systems, electronics and shipbuilding - projects that take a long time and cost a lot of money. Northrop Grumman reported a third-quarter increase in sales of 4%. Quarterly earnings were $$487 million, down from $509 in 2008. The recent stock price is $55.27 with a quarterly dividend of 43 cents per share. The earnings per share of $1.52 were enhanced by a 4.7 million share repurchase.

    PIMCO Total Return Bond Fund (NASDAQ:PTRRX)
    Mutual funds own large quantities of U.S. Debt in the form of notes and bonds. PIMCO Funds is a subsidiary of German insurance company Allianz. The PIMCO Total Return Bond Fund is widely held by institutions and individual investors who are attracted by the impressive performance since its inception. It is the largest mutual fund in the world. As of September 30, the fund's total assets were worth $186 million, and it is still open to new investors. The fund includes corporate bonds, U.S. Treasuries, and U.S. government-backed securities. The third quarter report shows 63% of the fund invested in government-related debt and 68% of the fund is AAA rated. With a recent net asset value (NAV) of $10.97 per share and expenses of 1.15%, the fund delivers a yield of 4.75%. The year-to-date return for 2009 (at NAV) is 13% as of October 31, 2009.

Economic data is important to understand, and it's available to the general public. An excellent source is http://www.economicindicators.gov/. Get the facts and interpret them for yourself.

To learn more about how the government deals with debt, read Is The U.S. Government Too Big To Fail?

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