US jobless claims looking better again

By Associate Editor David Stevenson Dec 08, 2011

David Stevenson

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Job indicators are good guides to how well an economy is really doing. More people working means extra spending and growth, and likely higher share prices, too. But if dole queues get longer, an economy and many of its businesses will suffer.

US ‘initial jobless claims’ (IJC) show how many Americans are claiming state unemployment benefits for the first time. The lower the figure, the better the news for the economy - and also the stock market. The four-week moving average of IJCs, which filters out the weekly ‘noise’, has generally been a handy pointer to both.

For the week to 3 December, IJCs dropped by 23,000 to 381,000, much better than expected. The IJC four-week moving average dipped by 3,000 to 393,250, the lowest level since early April.

What does this mean for stocks? Here’s our regular chart…

US weekly initial jobless claims

Source: Bloomberg

The purple line is the inverted IJC four-week moving average. The higher this goes on the chart, the fewer claims are being submitted. So a rising purple line is good news, and a falling line bad news. The red line is the S&P 500 index, the world’s most widely watched stock market index.

And the IJC four-week moving average continues to call the market right. It forecast the fourth-quarter rebound. Now the IJC suggests the S&P will keep recovering.

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Published in US stock markets | More articles by David Stevenson

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  • 1. Francisco23

    (09 December 2011, 01:06PM)  Complain about this comment

    The manipuliation inherent behind jobless figures and who is and is not included means month by month changes cannot be taken at face value and interpreted, in this case, as "good news".

    People drop out of this statistics not necessarily because they have taken up a job.

    Also, just because someone has taken a job does not necessarily lead to higher spending. They have debts to pay and savings to rebuild.

    Of course, the graph looks encouraging but then so might the interpretation of the tea leaves this morning.

    There is no primary cause and effect relationship explained here that is a guide to forecasting the future direction of the S&P.

    The article is misleading in implying direct cause and effect in this very simplistic manner and therefore lacks credibility.

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