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Without a sustained recovery in the labor market you can pretty much kiss a sustained economic recovery good bye.  Today’s jobless claims data was just one more example of these difficulties.  It’s hard to imagine that the job’s market will improve in the coming few quarters given the recent uncertainty in the economy.  Tepid top line growth and the reduction in cost cuts has resulted in an earnings outlook that is foggy at best and managing those expectations will be best done through cautious cost controls.  It’s no surprise that HR departments are keeping their powder dry.  Bondsquawk elaborates on today’s data:

The Department of Labor released data suggesting that people filing for first time unemployment benefits spiked, providing further evidence that the economy is stalling due to anemic job growth. Initial Jobless Claims increased to 484k people for the week ending August 7. In addition, Initial Jobless Claims for the prior week was revised slightly upward by three thousand to 482k. This week’s jump disappointed the market since it came in four percent above forecasts as economists expected a claims number of 465k. This drives the four-week moving average, which is universally used to “smooth out” the weekly volatility and to provide a discernable trend, to a higher level of 473.5k.

Weekly Initial Jobless Claims & 4-week Moving Average

This uptick is of concern for the U.S. economy. The the four week moving average has been hovering between 450k and 500k since last November, which is more in-line with further job losses based off of previous cycles.  A moving average of below 400k is typically more in-line with a recovery.

Continuing Claims for the week ending July 31 dropped to 4452k from a revised weekly reading of 4570k. The decline was better than forecasts as economists expected Continuing Claims to come in at 4535k. However, keep in mind that the drop does not necessarily mean a pickup in hiring as many of the unemployed exhaust their federal benefits as they hit the limit of 99 weeks under current legislation.

As far as reaction to the disappointing claims figures, bond yield changes are rather subdued which should not be a surprise given the huge decline in yields. The 2-Year continues to signal ’economic slodown’ and is trading at 0.53 percent while the 10-Year is hovering around 2.74 percent, both higher by 2-3 basis points from yesterday’s close.

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