Initial Thoughts 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 months!

The question that seems to be on everyone's mind lately is, When will the Stock Market pick up?

The 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.