About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, May 09, 2013

Initial Jobless Claims & Stock Market

For many years, I have used initial unemployment claims as both a leading economic
indicator and as a key component in tracking the stock market. In brief, falling claims
translates to rising stock prices because falling claims signifies a strengthening job
market. Now, when you are an indicator guy like me, the inferences to be drawn from
data behavior can be very interesting. Note for example that for the past 30 odd years
initial jobless claims have rarely fallen below 300k weekly and that claims data rise
before business downturns. What struck me recently is how rapidly jobless claims have
fallen and how close the recent readings are to the 300k level. Initial Jobless Claims

There are intriguing possibilities here. Powerful downtrends in claims tend to end
well before they make a cyclical low. Since this stock market advance has been so
highly attuned to the claims data, the question that pops up is whether, given the
already "low" level of claims, a consolidation down near the 300k level might not
be far off. At least it is somemthing to think about, because such a consolidation could
take considerable steam out of the momentum of the market if it comes along over the
next six months or so. As well, the history of claims data already suggests most of the
"juice" the declining data have provided to the stock market is likely already reflected
in prices.

There are other obvious possibilities as well, but the rapid improvement in claims
so far has me watching the data more acutely than I normally do. I would also not be
surprised that there are many players out there who have been cheering the claims data
as it descends but who are not aware of just how far along the trend has come.

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