Decline in Jobless Claims Implies End to Recession

Includes: DIA, QQQ, SPY
by: Arnold Landy

Initial Claims for Unemployment Insurance for the week ending May 16 were 631,000, down 12,000 for the week. Importantly, the four-week moving average of Initial Claims has resumed its downward course.

After a tick upward last week, it has now fallen five of the past six weeks, giving support to the likelihood that the recession will end very soon.

The four-week moving average peaked April 4 at 660,000, then declined over the next four weeks.

That marked the first time since the summer of 2007 (before the recession even began) that the moving average had fallen four weeks in a row. Based on past economic cycles, four consecutive weekly declines usually presage the recession's end within two months.

Surprisingly, last week's figure broke the string of four declines. That was unexpected; once the initial claims figures start to drop, they usually keep going down, steadily.

Today's data revealed that the four-week moving average has now dropped to 628,500. Today's announcement confirms the fact that we have passed the peak in initial claims and we are likely to come out of this recession soon.