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INITIAL CLAIMS DATA IS TURNING MORE BULLISH

Initial claims for unemployment insurance are turning downward, implying that the US labor market is about to shake off its recent weakness. After rising near 400,000 during the end of the second quarter, the most recent weekly figure has fallen to 353,000 and the four-week moving average dropped to 367,000. The most recent figure appears to be free of any distortions from recent changes in auto assembly schedules, and there were no unusual work disruptions or major seasonal adjustment factors.

To put this data into perspective, in 2007, at the end of the last boom, initial weekly claims were running in the low 300 thousands, and then soared to the mid 600 thousands during the depths of the last recession. A year ago, with the economy recovering, initial claims were running just above 400,000. So, we have seen steady improvement since mid - 2009, with some faltering during the second quarter of this year, as economic growth slowed.

Initial claims for unemployment insurance is an important component of the Conference Board's Index of Leading Indicators. Among those indicators it has a relatively short lead time signaling changes in the economic growth rate. So, look for continued drops in initial claims in the next few weeks to signal an imminent pickup in economic activity and job growth.

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