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The number of U.S. workers filing new claims for jobless benefits fell sharply last week to the lowest level since January (the seasonally adjusted data was again distorted by an unusual pattern of automotive industry.)  The claim figure is now 23% below the peak they hit in March.

We now have jobless claims getting better BIG TIME in the last three weeks!  Two weeks ago the jobless number came in at 617,000, last week 565,000 and this 522,000.  That trend speaks to a real improvement not deterioration in claims. 

INITIAL THOUGHTS - a1

Our view is that the rate of change in jobless and unemployment is in the rear view mirror and is a lagging indicator.  The point we are trying to make is that we are passed the apex in job losses, something most people disagree with. 

While we are focused on what happens on the margin, which means people are losing their jobs at a slowing pace, it is still as hard as ever to find a new job.  As more people join the ranks of long term unemployed or underemployed, we run the risk of a 90's Japanese style period of job stagnation.

 Ultimately, consumer spending and sentiment will be buoyed by rising employment rather that declining job losses. Last December, President Obama went on record saying that he aimed to create 2.5 million jobs over two years.  He has some work left to do!

Howard Penney

Managing Director