Jobless Claims Drop, But Reading is too Optimistic

As I mentioned was a likely scenario in my US Economic Week Ahead, jobless claims fell 47K to 522K. As with last week, early auto company layoffs have likely distorted the index due to misaligned seasonal adjustments. I do believe we should continue to see an improvement in jobless claims, but the levels seen over the past two weeks are too optimistic. Thus, I believe over the next several weeks this issue will begin to correct itself, and we will start to experience what appears to be an increase in jobless claims. The market places a lot of importance on the initial claims number as it is an excellent forward looking indicator to payrolls.

Continuing claims experienced a record drop of 642K to 6.915mn. But, this too was likely a one off event caused by statistical factors.