Anticipate Future Jobless Claims To Make Money

Includes: QQQ, SBUX, SPY
by: Markos Kaminis

Weekly Jobless Claims for the week ending May 5, 2012 hung around the same territory, as we wait for the next economic inflection point. A pet peeve of mine, the media produces promotional and often misleading headlines to get you to read the story, and so Thursday's most popular theme was that better claims have eased concern on labor. What's true is that the last two weeks have been better. What's troubling is that there's no vision in these articles for the ramifications of what is developing in Europe and China.

The latest Weekly Jobless Claims Report showed a decrease of 1,000 new benefits filers to 367K, though that's off a prior week figure that was revised higher by 3,000, to 368K. It's mixed news that basically offers the same truth; not much changed last week. Yet, the shares of staffing & outsourcing services companies gained on the day, with Kforce (NASDAQ: KFRC), TrueBlue (NYSE: TBI), Dice Holdings (NYSE: DHX), Kelly Services (NASDAQ: KELYA), CDI Corp. (NYSE: CDI), On Assignment (NASDAQ: ASGN) and Barrett Business Services (NASDAQ: BBSI) all higher.

The trend of the last four weeks is a more useful metric for vision into what's developing in labor in most instances. It would be less important than the weekly figure should war break out in the Middle East, or looking back at history, when events like the attacks on the World Trade Center occurred. In today's dynamic, though gradually changing, environment we can look to the moving average for guidance. What we see is that it's down 5,250, reaching 379K in the latest reporting period. We should note that through the four-week period, it swung higher and then retrenched. Before that, the claims count had been trending lower to a sticking point approaching 350K.

The problem with claims is that it is a lagging indicator, though a current data point. We get a good look at what's happening in real time, but it does not mean much. For this reason, we have to look ahead to what may drive the trend to come. For that reason, I say we're waiting on the next inflection point. What seems to be developing is a gradual creep toward recession, with deterioration happening in slow motion.

Yet, as Europe deteriorates, China is likewise offering signs of slowing economic growth. Just Thursday, China reported weaker than expected trade growth. This is but one of many recent data points souring for the emerging nation. This all plays back to America, because we serve and participate in those markets in a big way. They have offered support in our times of distress, and they have offered means of growth as our markets have matured.

The deterioration has led me to suggest industrials and other multinationals might suffer looking forward. I even believe the high-flying growth offered to our best brands might come under pressure as these markets correct. This is why I said recently that I would not buy Starbucks (NASDAQ: SBUX), a market favorite high growth multinational play. Starbucks recently showed softness in its European markets, and even McDonald's (NYSE: MCD) just offered some concerning news about global conditions as it missed the Street's April sales expectations.

Remember that with this weekly jobless claims data point, looking forward is the key, and by all means, looking past the promotional and misleading headlines. We can garner some information from the moving average and even the weekly count, but it's what will happen that matters to stocks which look ahead. That's why the PowerShares QQQ (NASDAQ: QQQ) lagged the SPDR S&P 500 (NYSE: SPY) Thursday, because of the forward looking insight of Cisco Systems' (NASDAQ: CSCO) John Chambers.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.