One of the best real-time macro indicators continues to point to better days ahead. The four week average in initial jobless claims fell to 314,750 this week. This is the lowest reading since October 2007. There have been some reporting errors in recent weeks that put downside pressure on the data, but the long-term trend is still clearly down. This means the labor market is slowly but surely improving.
What’s more interesting with claims data is to look at the cyclical trends. You’ll notice a few things from the chart below that shows the monthly average claims:
- Recessions are ALWAYS preceded by big spikes in monthly claims.
- The economy has typically not sputtered out before claims reach the sub-300K level.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.