The improvement in today's Unemployment Claims data is not necessarily a positive for the stock market. The data keep alive the possibility of a March Fed rate hike, as they show that the financial market turmoil is not yet crushing the economy. The problem is that the drag from the turmoil may take time to manifest itself, so current data that show strength will encourage a rate hike that would exacerbate future economic weakness.
To be sure, the latest weekly data are strong. Both Initial and Continuing Claims fell below their January averages, with Initial falling below the Q415 average, as well. But, it is too soon to say that this one-week drop is the start of a new lower trend, and we need to see several weeks of decline to confirm that it is not a head-fake.
From a somewhat longer perspective, the Claims data don't as yet suggest a pickup in Q116 Real GDP Growth. The Q116 averages-to-date are above the Q415 averages, raising the risk of even slower GDP Growth in Q16 than the anemic 0.7% in Q415. Of course, the Q116 averages would fall further if Claims stay low in coming weeks. So, the verdict is still out with regard to Q116 GDP Growth.
Both Initial and Continuing are for weeks ahead of the February Payroll Survey Week, but as they stand now they do not suggest a stronger gain than the +151k in January. The 4-week average of Initial is 282k, versus 279k going into the January Survey Week. Continuing Claims in the latest week are 8k above their level in the January Week.
Initial Claims Continuing Claims
(level, 000s) (level, mns)
Latest Week 269 2.239
Prior Week 285 2.260
January Avg 283 2.248
Q116 Avg to Date 276 2.248
Q415 Avg 270 2.187
Carl Palash
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