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One of our themes for 1Q10 is “BUCK BREAKOUT.”  We are Dollar bulls and currently long the dollar!

We are bullish on the dollar for the intermediate term 3 months or more.  It’s one of the best ways to be long the Fed having to have a mea culpa on interest rates.   Right now the new TREND line for the Dollar Index is 76.21.

The 434,000 Jobless number this morning continues the positive trend we've been seeing since March and more importantly is bullish for the Dollar. 

The question now is not are we going to see 11-12% unemployment but how quickly does it go to 9%.  In the short-term expectations are for unemployment at 10.1%, and that is still too high, especially for 1H10.  Referring to Josh Steiner’s note on the census hiring this year, the government is going to add 1.2 million job additions in this country in the next 3-4 months.  Yes they are short term jobs but they are going to be in the reported data and unless you submit that weekly jobless numbers and monthly unemployment numbers don’t matter, how they are accounted for MATTERS.

On the margin we are going to be bullish on the jobless numbers and the unemployment rate for the foreseeable future. 

The following comments on the jobless claim number are from Josh Steiner – Sector Head of Financials for Research Edge.

The rolling average claims improved this week to 450k from 460k last week - an improvement of 10k, well ahead of the slope of 5.4k/week since March (9 months of data). We are keeping a close eye on this metric as rolling claims are the leading indicator for ongoing recovery in the economy and, by extension, the loan books for consumer lenders. Claims are seasonally adjusted, but the seasonal adjustment factor doesn't fully normalize. As such, we've seen in the last few years claims trend lower around the holidays and for the first few weeks of January. We would expect this to continue so this morning's data is no surprise. We will be watching closely the trajectory in the back half of January and early February, as this has historically been when claims tend to rise.


For those wondering how to interpret a possible inflection in rolling claims should we see one in late January/February, we would suggest using a positive slope of 7.2k/week as an outer risk band. This is the fastest weekly rate at which rolling claims increased over a two week period since the trend of improvement began in March. Alternatively, in the absolute, one can use 475-480k as a near-term rolling upper limit based on the downward channel that's been in place since March.

Howard Penney

Managing Director