For the past 3 weeks, jobless claims have been creeping higher; they have exceeded estimates for 2 weeks in a row and are now the highest in a month.
The most recent reading showed 372,000 new unemployment filings versus expectations of 365,000; the four week moving average, which smooths out this volatile number, also increased to 368,000.
Jobless claims can sometimes be misleading being that last month’s average was not that much lower, but the BLS report showed the strongest gain since February. (The BLS payroll report only encompasses about 1/2 of a month’s data btw)
The reality is that this weak data has the QE minions licking their chops after they feasted on the FOMC minutes last night that detailed a conversation and perhaps more concrete hint of further action.
Many companies and the US government are slashing jobs or reluctant to hire because revenues are down year over year and they need to maintain costs. Technology and globalization both grant many corporations the ability to operate with minimal employment and still manage to increase profits.
I would be curious to hear your thoughts on unemployment in general. U3 readings have been above 8% since 2009, which in the longest duration since the end of WWII. The participation rate is also at an extreme low and if those folk (many of whom are unemployed, but not counted) begin to enter into the traditional job race then unemployment rates WILL rise.
How long can that last? At what point does cost cutting and lack of substantial employment come back to bite the average S&P company in the butt. Q2 S&P earnings are up just 4.3% year over year and without financials that growth is nil.
If flattish job growth continues, can the Fed really save the day or are we setting ourselves up for disaster? Do small variations the jobless claims really even matter all that much anyway?
Many questions I know; feel free to discuss any or all of them 🙂