Despite rising initial jobless claims and other negative economic data, the U.S. unemployment rate remains near historic lows. Hedgeye Director of Research Daryl Jones asked veteran analyst Josh Steiner if an uptick in unemployment would indicate that we’ve reached the bottom of the cycle and stock market.  

“No, it is actually when the rate of change improves from the worst point. As an example, in the Great Financial Crisis, initial jobless claims had an uncannily accurate print,” Steiner explains in this clip from The Macro Show. “The high point in jobless claims in March 2009 was the low in the stock market. From that week, initial jobless claims number got less bad on a week-over-week basis and the bottom was in.” 

However, other factors – like the monetary policy backdrop – must be taken into consideration before assuming jobless claims will directly correlate with the market’s recovery this time around.

“If you’ve got unemployment high and/or rising and you’ve got inflation still at a level considered unacceptable, you’re unlikely to see the Fed back off its hawkish stance, assuming we haven’t had a crisis at that point,” Steiner adds. “That’s probably going to be well through this year, and probably into next year. So, it is possible this time is different.”

Steiner: Cycle Bottoming? → Keep An Eye On Initial Jobless Claims - TMS Banner