Jobless Claims Signal Strength

by: Wall Street Strategies

By David Urani

Jobless claims for last week were down again, to 331K from 337K, and that continues a very nice trend for August so far. The four-week moving average now stands at 332K, and that's down from 351K at the beginning of last month. For me, initial jobless claims have a very good correlation to a lot of different economic indicators. Claims also tend to foreshadow other economic developments considering that they are very up to date, coming out every week.

Of course, next week we get the official jobs data for August and the trend is looking good. Claims tend to hold a steady correlation with the unemployment rate. The latest leg down in jobless applications may be signaling good news to come.

It's also a sign that, despite some turbulence in the markets this week, the conditions on the ground may actually be relatively unaffected. After all, right now a lot of the pessimism right now stems from the Federal Reserve, upcoming debt ceiling debates, and potential for a Syria conflict. These are issues that spook stocks but don't necessarily do anything to the job market. Likewise, these aren't issues that should really be denting corporate profits, either.

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