Pragmatic Capitalism

Practical Views on Money & Finance

Jobless Claims Continue to Nosedive

Looks like hurricane Sandy had a larger impact than most people are willing to admit.  That huge surge in jobless claims (from a 4 week moving average of 365K to 409K) in November was certainly temporary as we’ve now come full circle.  Today’s jobless claims data hit a post-recession low of 335K.   That brought the 4 week average down to 359K.

Why is this good news?

First of all, jobless claims are one of the best real-time indicators of economic activity.   We just don’t see recessions that aren’t accompanied by spikes in the claims data.  It literally doesn’t happen.

Second of all, the claims data tends to correlate fairly well with the S&P 500.  So, what’s good for the job’s market tends to be good for the stock market (more business hiring because they’re seeing better demand, etc).

Lastly, claims tend to be a good sign for the labor market.  Non-farm payrolls and the inverted claims data have a very high correlation.  At present, the trend is telling us that the growth in jobs is steady.

Things aren’t so bad after all.

(Claims vs payrolls via Orcam)


Got a comment or question? Feel free to contact Cullen via email here or on Twitter here.
Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering asset management, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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