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This morning's update on initial jobless claims is a timely bit of good news. In fact, the markets probably couldn't wait another week for this. For starters, the decline of 43,000 in new filings for jobless benefits last week is the biggest weekly drop since last summer. Even better, this fall comes at a time of heightened anxiety for this data series, and so the latest turn for the better is welcome for all the usual reasons, and more.

In recent weeks we've been concerned that the encouraging trend in jobless claims since March 2009 might have run its course, as we discussed here and here. Today's news offers a reprieve, at least for the moment. As the chart below reminds, the falling trend in jobless claims appears to be intact after all, or so the number du jour implies. Had the report leaned the other way... well, let's just say that we probably dodged a bullet, or maybe a freight train. (Click to enlarge)

Nonetheless, the tension between the forces of recovery and the headwinds of stagnation haven't gone away. We're not going to repeat here all the various ill winds blowing, other than to note that our basic concern about slow job growth is still very much on the docket, as we noted here. Indeed, while the latest report on new jobless claims offers a fresh round of optimism, the bigger picture remains clouded, to say the least.

What are the prospects for sunny skies? That's going to take a while. As we reminded last month, the three Ds of debt, deleveraging and default are clear and present dangers. The question is one of whether the markets will tolerate the long time horizon that's required for processing all the red ink. For the moment, the crowd is willing to see the glass as half full, but it's not obvious that this goodwill will run on indefinitely. For a rather chilling perspective on the D trio and the implications, see Niall Ferguson's piece in today's FT.

So, yes, today's jobless claims numbers deserve a collective sigh. We dodged a bullet—again. But the larger macro risks are still with us. It's mid-February on the calendar, but it's still going to be a long year.

Source: Employment Is Recovering, But Will the Markets Tolerate the Long, Slow Process?