U.S. Jobless Claims Improve but Don't Get Too Excited

Last updated 11/12/2009 9:04 AM ET (GMT -5) 10 Comments

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Kathy Lien

Director of Currency Research, GFT

According to the latest jobless claims number, the U.S. labor market continues to improve. However the pace of improvement is sluggish at best and reflects the slow turn in the U.S. economy. Weekly jobless claims rose by 502k, down from 514k the previous week while continuing claims dropped from 5.77M to 5.63M.

Even though weekly claims are now at the best levels since January and continuing claims at the lowest level since March, last week's disappointment non-farm payrolls number makes it hard to believe that we are really seeing a material improvement in the U.S. labor market. Companies continue to layoff workers with employees at AOL, Sprint and Electronic Arts receiving pink slips this month. If this holiday shopping season proves to be weak, more retailers may have to close shop, which should translate into even more layoffs.

Also, many people are waiting to put on their party hats once jobless claims break below 500k. This is a psychologically important level but given that we are only 2k jobs away from that point, the actual significance of claims printing below 500k may be minimal. Many people believe that the recession ended in July 2009 and if that is the case, then we have only see a weekly average improvement of 0.67% in claims since then. After the 2001 recession, the pace of improvement in jobless claims was double that. Therefore as Fed President Janet Yellen suggested, the U.S. economy could be facing a L shaped recovery with a gradual tilt to the upside which may discourage the Federal Reserve from rapidly unwinding monetary stimulus. As a result, the dollar carry trade remains intact.

Comments (10)

Semaj

November 12, 2009 at 09:31 AM ET

Recession ended in July 09, not even close in the housing industry I work in. If the weekly jobless improvement is @ half the pace of the recession of 2001 and this recessiion job loss is greater than -5% compared to -2% in 2001, than in real numbers that sounds to me more like a weekly jobless improvement rate that is @ a 25% pace to that of the 2001 reccession until we can get back to 0%. In the 2001 recession it took 2 years to get back to 0% & we havn't even bottomed out currently. Just a thought :(

klien

November 12, 2009 at 09:37 AM ET

I agree but no one really knows when the recession ended and we are benchmarking from Wikipedia

"By July 2009, a growing number of economists believed that the recession may have ended; as is often the case at the end of a recession, unemployment is still rising.[51] The National Bureau of Economic Research will not make this official determination for some time."

http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

Newstart

November 12, 2009 at 03:53 PM ET

The labor market has very little to do with jobless claims. The idea that fewer claims somehow translates into labor market improvement is like saying there are fewer sun strokes in Alaska so global warming is slowing down. I did my own study in Phoenix with 200 claimants. I have followed then from beginning to end. The government wants you to believe that once a person is no longer on the rolls they must be working. This reasoning doesn't fly. So far I haven't had a test case go back to work. However they won't be on the claims report...so it looks like their working. If you want to see a low month for claims start tracking from a high month and you can figure when a good percentage of people will be off the rolls and there you have a low month. Put your emphasis on the ADP payroll services..if they are printing a check chances are the person receiving it is actually working.

klien

November 12, 2009 at 04:58 PM ET

This is exactly what no one reports.

Doobp

November 12, 2009 at 10:17 PM ET

nods. thanks for sharing

Semaj

November 12, 2009 at 10:38 PM ET

That supports a belief that real unemployment could be over 20% currently. Factor in the waves of manufacturing jobs sent to overseas countries for the past several years and it seems that America has a much larger problem than the unemployment of the past 1 - 1.5 years.. Then factor in jobs held by illegal immigrants locally on top of that. I can speak for the housing construction market in the NY area that on top of all this unemployment data the illegal Latino population has greater than 50% of the jobs currently & Americans (legals) are a minority work force. Mmmm.

FXDragon

November 13, 2009 at 02:01 AM ET

So Americans now ironically volunteering for the dirty jobs they didnt touch during good times? mmm

Semaj

November 13, 2009 at 09:04 AM ET

Exactly. Getting an American to reply to a help wanted add in housing 2 years ago was a challenge. Now today you have an established work force that is trained in a trade and the owner of that company is trying to keep the cheaper labor busy since profit margins have all but dried up. But this flower was aloud to grow by local gov's & beyond falling asleep at the helm. It also could be a plan of a larger degree. Mmmm

FXDragon

November 12, 2009 at 11:03 AM ET

I think claims will fall more in December which will bring markets higher.

Stephan Smith

November 12, 2009 at 10:12 AM ET

This holiday season will really be important in determining what the employment rate will be at the start of 2010. Santa better be bringing extra gifts this Christmas, because if he doesn't there will be a high probability that more people will be jobless... and that's more horrifying than the Grinch.

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.