on the Initial Claims Numbers
By Peter S. Iuvara
This has been without a doubt, a very volatile time for most
investors. It seems like what investors need the most right
now is guidance. Guidance from Alan Greenspan on our economy,
guidance from CEOs pertaining to when their individual industries
and sectors will pick-up again and guidance from StockTradersPress
about where to park your money during the rest of the summer
The question that seems to be on everyone's mind lately is,
When will the Stock Market pick up?
first call initial claims number that came out early this
morning shows some near-term support that we are at or near
the bottom. In an optimistic report, the US labor market showed
some preliminary signs of strength last week. Initial unemployment
claims fell 51,000 to 366,000 in the week that ended Saturday
July 21 from 417,000 in the previous week. This is the lowest
initials claims level since 365,000 unemployment applications
were reported during the March 24 week.
July is typically a volatile summer month due to auto plants
and factory shut downs. These usually create spikes in the
jobless claims rate, followed by big drop-offs in claims as
the plants start up again. However, if you take a look at
the 30 moving average, which was 409,000, it is well below
432,000, the peak reached in mid-June. Additionally, a
quick glimpse of the comparison-chart above indicates that
initial claims have not only crossed below their unchanged
year-to-date levels, but also broke their 5-month up-trend
pattern by creating the first lower-low this year (Red Line).
So, what does this all mean? Initial claims and the unemployment
rate are important economic indicators closely followed by
Alan Greenspan and the Federal Reserve. Decreases in initial
claims help indicate that the business sector is near the
end of the "employee lay-off rope." Once corporate
lay-offs and initial claims stabilize back to minimal levels,
it will be a signal that corporate contraction and divesting
have finished and growth and expansion can begin once again.
We expect a small jump-up in initial claims next month as
factories re-open, but the overall trend on initial claims
and unemployment looks to be declining, which should be music
to investor's ears.