Today’s update on weekly jobless claims continues to signal growth for the labor market in the near term. Yes, it’s a modest pace of growth, but it’s likely to roll on for the foreseeable future. That’s the message once again in today’s report on new filings for unemployment benefits, which fell 5,000 last week to a seasonally adjusted 366,000, the Labor Department reports. Indeed, new claims are approaching the levels that prevailed before the last recession started. Combined with this week’s upbeat news in the January readings of the ISM Manufacturing and Non-Manufacturing indices, today’s claims report offers another data point for thinking that 2013 is off to a decent start. We’ll know more once all the January numbers are in, but the preliminary indicators to date leave plenty of room for optimism.
Daily Archives: February 7, 2013
Mr. Market’s Abnormal Relations: An Update
Why is the stock market up? Or down? There are countless theories, but one that resonates in recent years is linked to what I refer to as the new abnormal. This is the positive connection between the stock market and the implied inflation forecast via the yield spread between the 10-year Treasury Note and its inflation-indexed counterpart. In the grand scheme of economic history, higher inflation isn’t all that inspiring for the equity market. But this relationship has been turned on its head in recent years. Why? Well, a few things changed in the wake of the Great Recession. As a result, higher (lower) inflation expectations have remained closely bound with higher (lower) stock prices. This odd connection won’t last forever, but reviewing the latest numbers reminds that this abnormality continues to dominate… for now.