Are Tech Book Sales a Leading Economic Indicator?
by Madeline Schnapp
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Pages: 1, 2, 3, 4
Observations of the Behavior of Select Economic Indicators
While the NASDAQ provided an obvious set of data to use to compare with our book sales, it's instructive to compare both the NASDAQ and our book sales to other available economic indicators.
Several agencies in the U.S.government, such as the U.S. Department of Commerce, Census Bureau, Department of Labor, Bureau of Statistics, Board of Governors, and Federal Reserve System, gather and compile data used to compute economic indices. Financial markets, economists, market analysts, and the like use these indices to make judgments on the strength of the economy and, in turn, base many of their decisions on their respective "positions" using the data and their interpretations.
In surveying the landscape of available economic indicators, I selected several that would be strongly impacted by the technology sector of the economy. When these indicators are plotted against the NASDAQ and O'Reilly book sales at Amazon.com, they provide an interesting picture. Some of the indices are part of the components of the Index of Leading Economic Indicators. The components of the Leading Economic Indicator Index selected for the purposes of this article are Unemployment of the Civilian Labor Force, Average Weekly Hours Worked, and Manufacturer's New Orders. The other indices I selected are the Consumer Confidence Index (CCI), Semiconductor Billings, and the Help Wanted Index (HWI).3
Figures 4, 5, and 6 graph these indices from January 1999 through August/September 2001.
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Figure 4: Semiconductor Billings and the Consumer Confidence Index (CCI) both began their downward trend in September 2000, about five months behind the NASDAQ. (Click to enlarge) |
Consumer Confidence stayed fairly flat until September of 2000, and since then has dropped sharply through 2001.
Semiconductor Billings rose steadily until September 2000, and since then has also dropped sharply through 2001.
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Figure 5: The Help Wanted Index (HWI) peaks in February of 2000, while Unemployment begins to rise in October of 2000. We expect to see the HWI lead Unemployment. (Click for larger image) |
The Help Wanted Index dropped very slightly from January 1999 through February 2000, and since then has dropped sharply from February 2000 through 2001 and is still continuing its downward trend.
Unemployment fell very slightly from January 1999 through October of 2000, and since then has been rising continuously through 2001.
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Figure 6: Average Weekly Hours in Manufacturing and Manufacturer's New Orders of Consumer Goods peaked in March/April of 2000, coincident with the NASDAQ. (Click for larger image) |
Average Weekly Manufacturing Hours peaked in April 2000, and fell to a low in December of 2000. Similarly, Manufacturer's New Orders of Consumer Goods peaked in March of 2000, and then bottomed in January of 2001. Both indexes have been teetering along a tentative bottom ever since. The broad pattern matches that of the NASDAQ, but leads the CCI and Semiconductor Billings by about four or five months.
Economic Indicators Vs. the NASDAQ and Tech Book Sales
Finally, let's plot some of these indices against the O'Reilly technical book sales data from Amazon and the NASDAQ. Figure 7 charts Amazon sales against the NASDAQ, the CCI, and the Help Wanted Index. Figure 8 plots the NASDAQ and Amazon sales against Semiconductor Billings and Civilian Unemployment.
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Figure 7: The Help Wanted Index peaked in February of 2000, coincident with the NASDAQ and O'Reilly book sales. As expected, the Consumer Confidence Index lagged behind the both NASDAQ and the Help Wanted Index. (Click for larger image) |
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Figure 8: Semiconductor Billings peaked in October of 2000 while Civilian Unemployment began to rise in January of 2001. Both of these indicators lag behind the NASDAQ and O'Reilly book sales by six to nine months, respectively. (Click for larger image) |
If we accept that the NASDAQ is a leading economic indicator, then the close correlation of O'Reilly book sales at Amazon suggests that tech book sales may also be a leading economic indicator.
Another interesting observation that falls out of this study is the fact that job postings also seem to be a leading economic indicator. Although employment is one of the metrics used to compute the Leading Economic Indicator, the HWI specifically is not included. As shown above, the fall in the HWI was coincident with the fall in Average Weekly Hours Worked in Manufacturing, Manufacturer's New Orders, the NASDAQ, and O'Reilly technical book sales.
