4/11/2013
By David Urani

In the wake of last week's rough employment report, there have been a lot of experts out there finding (or at least trying to) silver linings. In fact, you could say investors have largely found them because ever since last Friday's drop, markets have charged higher and gone into new record territory.

A few of those arguments include the fact that unemployment dropped significantly in the 25-34 age range, we were strong in important areas like construction and business services, the unemployment rate was down, and the exodus from the workforce may actually be older folks retiring as opposed to people giving up. Certainly these are debatable points but you can tell they were in the back of the market's mind.

And therein lies the reason the market may be reacting well to this morning's jobless claims data. If one isn't sure what to think about the BLS report, the next best place to look is at jobless claims. In a way, I almost prefer jobless claims and find that it's a good leading indicator for a number of economic metrics.

Consequentially, when claims showed a drop to 346k from 388k not only did it plunge by a large margin, it also more than reversed a big uptick in the previous week. It also perhaps reinforces that drop in the unemployment rate.

While at times I do question the unemployment rate due to the mass dropouts from the labor force (which has the effect of removing folks from the "unemployed" list), the sustained downtrend in initial claims in the past year has helped to reinforce it for me to an extent. It makes sense if you think about it; fewer people being laid off (decreased new jobless claims) means less unemployed.

David Urani
Wall Street Strategies