The data highlight on Thursday was the big drop in initial jobless claims. They fell to 300k from an upwardly revised 332k. This is the lowest level since 2007, and adds to evidence that the US labour market is getting over the weather-effect that knocked it sideways earlier this year.
This weekly data point is worth watching, not only because it is the timeliest indicator of the US labour market, but also because it correlates nicely with the S&P 500. The chart below shows the 4-week moving average of initial jobless claims (orange line) and the S&P 500 (yellow line). The orange line is inverted, so the decline in initial jobless claims is represented by a rising line.
What is this chart showing us?
The two lines track each other closely, if not perfectly, which makes sense, as an improving US labour market should benefit corporate America.
The other thing to note is that in the last week or so initial jobless claims have continued to improve, while the S&P 500 has fallen back from last week’s record highs. Although this correlation is not perfect, since the two tend to move in the same direction, if jobless claims are improving then the S&P 500 may continue to push higher to re-test the recent record highs.
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