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This morning's initial jobless claim report was much better than the futures market is indicating. Below we plotted initial jobless claims in the US over the last three years, this morning's number was equivalent to mid-2008 levels and is clearly on its way down. After being mired in a rut between 450 and 500 thousand jobs per week, new claims have experienced what technicians call a "break down" and look to resume their downtrend.

Initial jobless claims 123010

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The related report showing continuing jobless claims did not paint quite such a bright picture, but by plotting that on a graph as well we can clearly see significant improvement over the last eighteen months. Improvement in continuing claims was also stalled throughout much of 2010, but recent declines show that the potential for a double dip recession are waning.

Continuing claims 123010

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The real clincher, or icing on the cake, will come one week from tomorrow when monthly non-farm payroll data is released. Currently economists are looking for the country to add about 135 thousand jobs, which is a modest gain. Below we have plotted the total non-farm payroll number (in millions) on the left hand axis and compare it to a logarithmic chart of the S&P 500 on the right. The dotted grey lines show S&P 500 bottoms during US economic recessions. In each case the bottom in the stock market preceded the bottom in the labor market, and the S&P 500 was a leading indicator for the economy. With the S&P 500 making new 52 week highs almost daily, we expect to see improved economic reports in the future.

Nonfarm payrolls 123010

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Source: Uptick in U.S. Employment